What is Procurement?

Procurement is the process of finding and agreeing to terms to acquire and purchase goods and services from an external source which enable an organization to operate and/or manufacture products in a profitable, sustainable and ethical manner.

Every partnership in procurement begins with the bidding process to select the right contractor or supplier for the job. This includes ensuring an organization has an effective way of identifying contractors and suppliers who are aligned with its values. It requires a deep dive to qualify contractors and suppliers based on finances, competency, quality, sustainability and safety. Alignment from both parties is critical and the best way to ensure that the contractors and suppliers that an organization partners with have a responsible approach to conducting business and add long-term value to the partnership.

The procurement department of an average company spends an estimated 50%-70% of every revenue dollar and includes items such as raw materials and services. In addition to purchasing, the department must also manage vendor selection, including strategic vetting and contract negotiations while maintaining strong relationships with contractors and suppliers.

Purchasing is a strategic function that can be used to control bottom-line costs and improve customer satisfaction. In recent years, firms have placed a bigger emphasis on ways to lower their operating costs as small reductions in costs can have a huge impact on profits.

Collecting and Analyzing Supply Chain Data
A roadblock in the procurement process is inaccurate or inconsistent data across multiple systems. Today, companies are at several different stages when it comes to tracking pre-qualification documentation from their contractors and suppliers. With a wealth of information at our fingertips, it can be overwhelming for managers to properly evaluate collected data from a holistic perspective.

Leveraging a digital solution, such as a contractor management platform, can improve the efficiency of the pre-qualification process. Technology can strengthen organizations’ relationships with their suppliers and contractors to be partners in managing risk and overcoming roadblocks in procurement.

The use of technological services allows Hiring Clients to track and view trends in a centralized location to analyze the entire procurement process through a singular lens. From here, it makes it easier to communicate priorities and expectations to suppliers across the supply chain. Digital solutions can help track data to ensure processes are meeting the company’s goals, so having assessments of metrics and analyzing data regularly is a necessary step to an ongoing partnership.

Technology in the Procurement Process
The use of technology in the supply chain continues to increase. Platforms can help companies source suppliers, bid on transportation, monitor temperature-sensitive products, and track and trace shipments. While technical solutions can help increase the safety of products, the use of additional technology to do so can expose the supply chain to the risk of cyber-attacks. Businesses must not only implement technical security controls, but they should also create a culture of cybersecurity awareness within their organization to help mitigate the risks of any potential breaches.

Hiring Clients should evaluate their suppliers and hire those that align with the organization’s values and are committed to the safe transportation and distribution of products. By communicating goals to ensure the safety of the supply chain and finding solutions to close those exposed gaps, organizations will be able to create a safer, more transparent supply chain. Digital solutions can also be used to help evaluate which members of the value chain are aligned with sustainable methodologies to ensure the supply chain remains strong.

Supply Chain Disruptions
Suppliers should anticipate continued disruptions as a result of the pandemic and organizations should proactively prepare their logistics. Disruption of global supply chains in the last year and a half have highlighted the factors that disrupt the flow of goods and services, including high impact factors related to environmental, social, and governance (ESG) risks. Using socially responsible and sustainable suppliers is crucial in ensuring a secure value chain.

ESG in Procurement
In addition to ensuring proper logistics, companies need to confirm they are using a diverse supply chain, that they and their suppliers are using fair and safe hiring and work practices, and are operating in a socially responsible manner within their communities.

Companies are paying more attention to the sustainability risks throughout their entire supply chains with the threat of legal and reputational risks and financial investments at stake. In an increasingly global economy, complex supply chains may expose companies to hidden risks and stakeholders continue to demand greater transparency and action when it comes to ESG initiatives. More companies are beginning to examine how this can be monitored and accounted for in their supply chain to ensure they are practicing sustainable sourcing and procurement.

There are several challenges in the procurement process that can affect companies’ sustainability initiatives. A lack of transparency in suppliers’ operations and a lack of standardized data pertaining to ESG are some of the biggest obstacles.

Oftentimes, contractors and suppliers may not even be aware of how their operations are impacting the ESG of their Hiring Clients. Being upfront with contractors and suppliers regarding the organization’s expectations surrounding ESG requirements can help create a shared vision and prioritize sustainability throughout the whole supply chain.

How ISN Can Help
ISN’s global platform, ISNetworld, supports an extensive network of nearly 700 Hiring Clients that leverage the platform’s tools and data to capture and review information on more than 75,000 contractors and suppliers.

If you are a current ISN Hiring Client subscriber, contact your account representative about how best to leverage ISNetworld’s tools to support your contractor and supplier information management program.

If you are a Hiring Client interested in learning more about ISN’s platform to help you reach your procurement goals, request a demo of ISNetworld.