Successful procurement strategy benefits are usually derived from adequate and efficient procurement procedures that achieve cost optimizing that meet user requirement. Satisfactory procurement activities are resulted in three major advantages: (1) cost savings, (2) product effect, and (3) technology development commitment. Supplier partner management should be customized to those principles that are aligned with the overall strategy of business value. Relationship results may vary from cost savings to collaborative product development. Once the objective (output) has been determined, it is possible to develop the correct partnership.
For example, not all vendors should be treated in the same manner. Its technology allows sourcing executives to develop and implement a range of different supplier approaches. Therefore, effective procurement practices involve the choice of strategies which conform to the prevailing circumstances.
Terminology of Procurement versus Purchasing
Procurement is often mistaken for purchasing, and the two terms are often used interchangeably. We need to understand clearly the difference between procurement and purchasing. Purchasing refers to the process of ordering and receiving goods and services. It is a part of the procurement process. Purchasing refers to the process involved in ordering goods such as request, approval, and the creation of a purchase order record and ultimately the receipt of goods.