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Procurement Specialists In Today's Business World

By Bisk
Procurement Specialists In Today's Business World

Procurement was once considered an occupation, but spurred by the rise of globalization has evolved into a recognized profession. Businesses in all industries, in both the private and public sectors, depend on the expertise of procurement specialists to obtain the products, materials and services needed to conduct operations, and do that at an acceptable cost.

A manufacturing company may spend 70% of its revenue on purchases from outside suppliers, according to Dr. Tobias Schoenherr of Michigan State University. For a company the size of GE, that could amount to $100 billion, he said in a lecture on supply base management.

A non-manufacturing company typically spends 40% of its revenue on outside suppliers, he said.

The duties performed by procurement specialists vary widely according to the nature and size of the business and may even vary daily. Here, we'll look at some of the multiple roles a procurement specialist may fill, as well as the knowledge needed to perform them.

Procurement Specialist Roles

While the primary duties of a procurement manager or specialist are linked to sourcing goods and services for the organization, they also can handle additional duties:

  • Research: Procurement managers evaluate and compare products and services to determine which best meet the organization's needs.
  • Cost analysis: Obtaining goods at the right cost can determine whether the company achieves profitability. Cost is also a factor when setting prices for the company's products or services which must be in line with what the market will support.
  • Inventory control: Often, the procurement specialist oversees inventory of raw materials or other goods and places orders when supplies run low.
  • Negotiating contracts: Negotiation is a major share of the procurement specialist's job. After securing the best pricing, terms and delivery options for each product or service, they settle the contract.
  • Projecting future needs: Not only do procurement specialists manage current needs, they strategize with various departments and suppliers to ensure the organization's future needs will be seamlessly met.

Knowledge Required to Succeed in Procurement

Most procurement specialists hold at least a bachelor's degree in business, finance or a related field, according to the U.S. Bureau of Labor Statistics. In addition, the BLS said, many seek advanced education to hone skills specific to their profession.

In specialized professional education programs, procurement courses cover such topics as:

  • Strategies and tools for evaluating supplier performance
  • How to develop quality relationships with suppliers
  • Effective tactics for negotiating costs and contracts
  • Managing inventory with quantity and quality merchandise control
  • Establishing e-procurement in the organization
  • How to promote ethical behavior in an organization
  • Driving environmental sourcing and sustainability 

Additional education beyond the bachelor's degree is a path for supply chain professionals who wish to improve their skills and knowledge and seek to advance their career to become a procurement specialist or manager. It also is valuable for professionals from other fields looking to move into procurement or other areas of supply chain management.

How Procurement Specialist Roles Are Evolving

Some companies have increased their reliance on external procurement specialists to source everything from payroll software packages to marketing and legal services. These specialists have a deep understanding of specific industries and of the intricacies of negotiating contracts in their area of expertise.

In-house procurement managers are becoming more specialized, as well. New technology enables them to take on more complex and strategic roles in many organizations. They are becoming more empowered to analyze business operations, identify potential problems and recommend solutions.

The role of purchasing and attention given to procurement has changed, Schoenherr said.

"If we go back 30 or 40 years, purchasing was primarily a clerical activity. The focus at that time was primarily on doing that work efficiently," he said.

"Over time, attention turned to really the amount of money that we were spending with outside suppliers. The focus moved from clerical efficiency to making sure that we were getting the lowest prices for the products and services we were buying for the enterprise."

Today, companies are looking at whether suppliers provide the best value to the company.

"In leading organizations, the focus in the purchasing function today is really on buying for best value to the business," Schoenherr said. And that is when purchasing turns into a competitive advantage.

They are also focusing more on developing good supplier relationships, improving internal communications and leveraging the power brought by emerging technological tools.

"Having the appropriate kinds of relationships with suppliers and managing those relationships effectively is critical to making sure we can execute this kind of best value purchase," he said.

Companies are not buying just the product or services from a supplier. They are buying its capabilities and expertise, according to Schoenherr.

Reducing risk is another important role for procurement specialists.

There are four basic dimensions of risk to a supply chain, Schoenherr said:

  • Disruption of the physical flow of the product through the supply chain
  • Sudden and unexpected increases in costs or prices
  • Security of the product or its condition as it moves along the supply chain
  • Activities by suppliers that could reflect badly on the enterprise

By closely analyzing suppliers, they can identify those at risk of failure and prevent possible supply chain disruptions. 

Job Outlook for Procurement Specialists

Procurement professionals can expect a steady job market in coming years as cost-conscious organizations continue to rely on their expertise to source goods and services at the right cost. 

The BLS classifies procurement specialists as purchasing agents. The agency projects a 3% increase in jobs through 2022 for those workers. However, the BLS predicts healthcare and companies involved in computer design and related services will see strong job growth.

Salary Range

Salary levels remain strong for procurement specialists. According to the BLS, the median annual salary for purchasing buyers and agents was $61,000 in 2014, while the top 10% of earners were paid $98,000. 

The District of Columbia along with four states, Virginia, New Jersey, Maryland and Alaska, offered the highest average salaries for purchasing agents and buyers in 2013, ranging from $71,000 in Alaska to $88,000 in the District of Columbia, according to the BLS.

Purchasing managers, who usually have at least five years of experience in procurement, typically command higher pay and the BLS reports a 2014 median salary of $106,000 for this category with the top 10% earning $169,000. Rhode Island, New York, the District of Columbia, New Jersey and Maryland had the top average salaries for purchasing managers in 2014, going from $133,500 in Rhode Island to $127,700 in Maryland, the BLS said.

The challenging and ever-changing role of procurement in the supply chain provides solid potential as a career choice for people who are familiar with supply chain operations and wish to expand their knowledge and skills in this area.

Category: Supply Chain Management