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Procurement policies and procedures

Get to grips with the objectives of a procurement policy

Objectives of a procurement policy

A procurement policy commits an organisation and every individual involved to meet an objective. There are several objectives which are included in policies. Legality and accountability are non-negotiable and should not be broken under any circumstances.

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Legal

Procurement activity will comply with all the relevant laws and regulations in which the organisations operate, supply and source from. It also includes laws on taxation, environmental regulations, employment, health and safety and corruption laws. The organisation needs to be committed to the laws and regulations and to report and refer any suspicious illegal activities. 

Accountable and auditable

The organisation must maintain systems, whether manual or electronic, for all purchases contracts and external commitments. 

Ethically, environmentally, and socially responsible

Areas for organisations to consider within a procurement policy are human rights, equal opportunities, diversity, corporate governance, sustainability, impact on society, community involvement and ethical trading.

Economically effective

Organisations must ensure that a portion of revenues on bought in goods and services must be economically effective. For example, consider the life-cycle costs of products or services including maintenance, reliability, and disposal. 

Exploitation of developments

Those responsible for procurement must take care to ensure the supply chain does not lose the ability to adapt to new or emerging technologies and processes.

Risk management

Procurement must identify, minimise, and manage risk within the supply chain. This includes supply risk, demand risks, process risks, control risks, environmental and social risks. If a risk is identified, it should be reported to stakeholders.

Continuous improvement

Everyone involved in the procurement process must improve their knowledge and skills and the organisation must support this. 

Performance targets

Where performance targets, incentives, bonus schemes apply to members in the procurement process, the policy should grant precedence and where such conflicts appear, they should be reported. 

 

Benefits of a procurement policy

Procurement policies have many benefits and it’s not just limited to helping procurement stick to certain objectives and obligations.

  • Cost savings:
    Procurement policies help organisations lower costs by procuring services and contracts at the best value. It helps to gain better visibility into the organisations budget.
  • Efficiency:
    A good procurement policy ensures products are always of the highest quality.
  • Innovation:
    An effective procurement process will help procurement look for new innovative products to gain a competitive edge.
 

How to set up a procurement policy

There are several best practices to consider when setting up your policy. Procurement policies can get complex but look at some of our hints and tips to get you started.

  • Use clear, simple language so employees can understand the policy
  • Identify everyone’s roles and responsibilities
  • Consider assigning someone to maintain and refresh procurement policies or to be a ‘go to’ person if there are any problems
  • Incorporate some checklists and forms so staff can visually understand the policy
 

What is procurement?

Procurement involves the buying of goods and services that enables an organisation to operate their supply chains, in a profitable and ethical manner. Explore deeper into how procurement is defined, the role it plays and a how a career in procurement can benefit you.

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