What is a procurement policy?
Each organization operates uniquely and has different needs. A procurement policy provides a framework under which such needs are to be met.
The procurement policy constitutes a set of rules that govern the procurement process and lay down the basis for procurement practices. It defines standards and identifies the goals of the procurement function to guide employees in decision-making. Let’s go through some examples.
Suppose you want to get a PO approved, but you’re being asked to get it approved by multiple personnel rather than just one. In this case, it is entirely possible that your organization has a policy around POs that are above a certain budget threshold. Similarly, your company will have policies around onboarding new vendors, the types of contracts it establishes with vendors, budgets of different departments and projects, confidential information, supplier selection criteria, etc.
Designing thorough procurement policies is essential to optimizing the company’s procurement procedures per its goals. Such a policy can suffer because of communication errors and lack of oversight, insight, and visibility. However, you can make policy implementation effective by using procurement software.
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