7.3. Procurement Role in Supply Chain Management

Maintaining a healthy supply chain—that is, cultivating a network of “activities, people, entities, information, and resources” that allows a company to acquire what it needs in order to do business—is a major concern for any effective organization (Kenton, 2019). Supply chain management encompasses:

The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with…suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. (Vitasek, 2013, n.d., p. 187)

When done well, supply chain management “results in lower costs and a faster production cycle” (Kenton, 2019). It is a living-order discipline focused on protecting a supply chain from the evolving threats to which it is vulnerable. For example, here are just a few recent threats to American industries:

• National and Global Politics: In the first half of 2019, tariffs on Chinese imports forced American companies to choose between raising prices or absorbing increased costs.
• Production Shutdown at Key Supplier: A 2018 fire at a Michigan parts plant cut off supply of parts for Ford F-150 trucks.
• Changing Government Regulations: New restrictions on hazardous substances imposed by the European Union limited chemicals U.S. companies could import from the EU after 2017.
• Extreme Weather Events: Flooding in Thailand in 2011 shut down computer parts factories, crippling hard drive suppliers worldwide.
• Shortage of Skilled Manufacturing Labour: Starting in 2018, American electronics suppliers found that a tight labour market meant they couldn’t produce circuit boards on schedule.

As a project manager, you will often have to focus on a core element of the supply chain—procurement. In its simplest usage, the term procurement means acquiring something, usually goods or services. For example, as a project manager, you might need to procure any of the following:

• Commodities: Fuel oil, computer hardware
• Services: Legal and financial services, insurance
• Expertise: Special technical know-how needed for marketing and communications, public engagement, project design and reviews, or assisting with project approvals
• Outcomes: A specified amount of thrust hours produced by a jet engine; a net reduction in energy usage generated by improving a heating system; conformance to a government regulation

In the construction field, project managers may spend a good deal of their time managing the entire procurement process, selling goods or services in some situations and purchasing goods or services in others. If that’s your situation, you might have to create proposals for the work you hope to do and then negotiate the contracts that will set the project in motion. On other projects, you might have to review proposals submitted by potential suppliers and then oversee the final contract with the selected supplier. Throughout, you’ll have to navigate the ins and outs of many relationships. By contrast, in manufacturing and product development, project managers often have little to do with procurement. In IT, project management is often closely tied to purchasing and overseeing the implementation of new software products. Whatever your procurement duties are, it’s essential to understand overall expectations and the established processes for procurement throughout your organization.

“4. Procurement” from Technical Project Management in Living and Geometric Order, 3rd edition by Jeffrey Russell, Wayne Pferdehirt and John Nelson  is licensed under a Creative Commons Attribution 4.0 International License.