As competition intensifies in the fast-moving-consumer-goods (FMCG) sector, procurement department plays a critical role to manage order planning with budget allocation, budget planning and cost savings, and to ensure delivery on time. The best procurement practices are designed to be cost-effective and improve productivity, which also applies to a company.
This article attempts to examine the best practices for procurement in the FMCG sector. But first, let us differentiate the terminologies of procurement and purchasing. Purchasing covers the system and processes from sourcing to order management. Procurement involves the strategic implementation of Purchasing, active interaction with both internal customers and the external suppliers, through Supplier Relationship Management (SRM). The chart below illustrates the difference between Procurement and Purchasing.
Aligning the Procurement Functions
Procurement is being recognized as a strategic function that can deliver bottom-line savings. Some organizations would opt for centralized procurement while some prefer the decentralized approach with procurement professionals present in each department. However, some may choose a combination of these two options. But the right structure needs to be followed up by procurement professionals.