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CHAPTER 1
PRINCIPLES OF SUPPLY CHAIN AND PROCUREMENT MANAGEMENT
1.7 THE IMPACT OF PROCUREMENT ON OTHER FUNCTIONS
The procurement function has an influence on the activities performed by other
functions. Procurement officers have to act on an equal footing with their internal
customers and suppliers/business partners. It is crucial for the procurement
officers to examine their relationships with key internal functions/business
partners in design engineering, operations, marketing/sales, and accounting/
finance. Procurement officers also have to ensure a continuous supply of
inventory to internal business partners to maintain the internal relationships.
1.7.1 THE PRODUCTION AND ENGINEERING FUNCTION
The production function depends on the procurement function to ensure efficient
production processes and lower manufacturing costs. Procurement also has to
ensure the timely and correct supply of materials to avoid production stoppages
and products of poor quality as well as the optimal utilisation of facilities.
1.7.2 THE MARKETING FUNCTION
The procurement function relies on the marketing function to understand the
needs of customers. The constant contact between the procurement function and
suppliers enables procurement to identify products with good market potential
and can help marketing to extend its product range. Marketing depends on
procurement for the timely availability of stock.
1.7.3 THE ADMINISTRATIVE AND FINANCE DEPARTMENT
The administrative function relies on procurement for purchases of products
such as computers, office furniture and stationery. Finance is more interested
in factors such as stock-keeping, conditions of payment and cash flows that
affect the procurement budget [22].
1.8 CENTRALISED VS DECENTRALISED PURCHASING
Top management must make the decision on whether to centralise or decentralise
the procurement function. This is a major issue within large organisations. With
centralisation, the authority and responsibility for the procurement function
are assigned to a central function; and with decentralisation the authority
and responsibility for the procurement function are dispersed throughout the
organisation. Some large organisations opt for a hybrid structure where authority
and responsibilities are shared between the central procurement function
and business units, divisions or operating plants [10]. However, whether an
organisation centralises or decentralises its function depends on the pressures
it is facing.