The Importance of Procurement in Supply Chain Management

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Changing consumer preferences have also altered the procurement process of the organizations, thereby enhancing its importance in the supply chain management. As globalization has opened up new markets, companies have access to suppliers outside their domestic market. Moreover, as they have global sales, they also need global suppliers because it helps them to achieve economies of scale (McGinnis amp. McCarty, 1998). This has impacted the way companies approach procurement. Most industries and especially the healthcare, utilities, transportation and retailing are going in for volume purchase, which enables them to demand lower prices. Technology has enabled companies to track and consolidate purchases across the entire organization. Organizations are even able to benchmark certain suppliers based on their performance.The market has become demand-driven which cannot ensure forecast accuracy. The buyer’s responsibilities have moved beyond finding the right materials and services at the best price. Buyers’ role is enhanced as they are responsible to ensure the flow of information and materials through the supply chain (Oracle, 2006). Shortages have to be prevented and inventory investment has to reduce. The procurement managers have to spend time on developing a strategic relationship with the suppliers.The procurement process in the SCM of the automobile sector and the apparel sector has great importance. Many renowned apparel brands such as Gap Limited, Dillard’s, and Liz Claiborne have outsourced their supplies to low-wage countries such as China. A Chinese company has set up a ‘supply-chain city’, which may probably be the largest manufacturing facility in the world (BCG, 2008). The benefit to the apparel brand owners is that this ‘supply-chain-city’ works as their own set up where they come and work as their own office.