Businesses that need to procure goods or services often start with a non-professional to perform these tasks often hiring a Procurement Manager. However, when a business needs to remain within its budget, the help of a procurement manager can help an organization:
- Stay on budget
- Secure better contracts
- Improve spending
If you’re a business owner considering hiring a procurement manager or you’re considering a career in procurement, this guide is for you.
What is a Procurement Manager?
A procurement manager is responsible for helping companies do two things:
- Procure products (including software)
- Procure services
Businesses have several moving parts and rely on others to supply them with everything from inventory supplies to cleaning services.
What Does a Procurement Manager Do?
In a manager’s day-to-day tasks, they’ll work on creating and following a buying strategy that fits within the company’s budget. Additionally, they’ll determine all of the goods and services required, and then find and compare vendors to meet demand.
If a company is larger in size, it’s not uncommon to have teams of buyers who work under the procurement manager.
These teams will be responsible for ensuring that all teams and divisions within an organization have the supplies and services they need to complete their job duties.
During their day-to-day activities, managers may:
- Balance the budget of each department with their needs and the company’s overall budget
- Collect and analyze all of the business’s decision-making data to ensure that internal purchasing decisions are warranted
- Analyze partner and vendor relationships to ensure that the business’s needs are met
- Manage all inventory and work on reordering when supplies meet certain thresholds
- Find suppliers that meet requirements, such as certifications or insurance, that can fill the business’s needs within budget
- Research and compare vendors and suppliers to ensure that they can fill the needs of their employers
On top of these duties, managers may have varying tasks, depending on the business’s size and employees. For example, if new procurement staff is brought in to help with sourcing, the procurement manager will be responsible for hiring, training, and managing these employees.
Additional tasks that may be assigned to these professionals are:
- Creating and executing procurement policies and procedures
- Drafting and negotiating contracts with suppliers, and ensuring that the terms are favorable
- Monitoring the terms and conditions of all suppliers to verify that they’re meeting contract obligations
- Negotiating and working with suppliers if their goods and/or services do not meet requirements or are defective
- Staying informed of recent industry developments and attending industry events to network with new suppliers
- Working alongside accounting departments to pay supplier invoices in a timely manner
Companies often hire procurement managers when they grow from a few employees to larger teams with multiple departments, all of which need supplies and services.
Why Does a Company Need a Procurement Manager?
Small businesses that have just a few employees likely don’t need a manager who focuses only on procurement. When businesses grow and their needs expand, a procurement manager can be quite beneficial.
Benefits of Hiring a Procurement Manager
An expert in procurement is an asset to any business. The benefits of procurement professionals in the workforce include:
The average cost to hire a new employee is around $4,000, and while this figure can vary, it’s a good indicator of the initial cost of hiring a procurement manager. However, these professionals rapidly make up for hiring costs and will save businesses more money in the long-term through negotiating contracts, comparing suppliers and staying within budget.
Customer churn is another major concern for businesses, and experts in procurement can help alleviate this issue.
Executing and monitoring contract obligations is a key duty of the manager. If a product or key inventory item is not available by the main supplier, the manager will work to source it from alternative vendors.
Keeping business moving along and having the supplies necessary to fulfill orders reduces customer churn rate and can even improve loyalty. Over the long term, companies will save money when hiring a procurement specialist.
Product and Service Reliability
Reliability is crucial to a business’s success. Companies have contractual obligations that they must fulfill. Procurement managers ensure that businesses can meet their customer and contractual obligations.
Consumers demand reliability, and with the right manager in place, businesses will have the items they need to fulfill demand.
Maintains Company Values and Goals
Companies have goals and values that change rapidly. Managers know and adhere to these values in ways that become complex if multiple non-managers are working on procurement. For example, a manager can work on a company’s goal of working with only sustainable suppliers.
Managers can negotiate and let contracts expire to meet the business’s vision and goals.
Sustainability, in this instance, can help a business improve its image and even land different contracts. In the public’s view, sustainability is highly valued and may lead to more customers buying a company’s products and services.
Stays Within Budget
Budgets change, and it’s up to these managers to know and adjust to budget constraints. Through their relationships with suppliers and negotiating skills, they’ll work to fulfill demand while staying within budget.
If staying on budget isn’t possible, they’ll alert their superiors to discuss the problem before it impacts business operations.
Procurement Manager Salary
Based on the figures above, procurement managers have wide salary ranges, from $54,000 to $232,000. Experience plays the largest role in whether a manager can demand the average salary or not.
Based on the data collected, the high salary of $232,000 is abnormal and not what most professionals in this field can expect.
A few positions available at the world’s leading companies at the time of writing this article pay:
Most listings pay over six figures, but there are a few paying in the high $90,000s. Experts with less than four years of experience will earn closer to the entry-level figures above, and the select few that do breach the $200,000 mark have 15+ years of experience.
Procurement Manager Considerations When Hiring
Business leaders and human resource departments that have never hired a procurement manager before may not know what to consider during the hiring process. However, before discussing these considerations, it’s crucial to answer one question: when should you hire a procurement manager?
When Is the Right Time to Hire a Procurement Manager?
Debates on when to hire a procurement manager are common among CFOs and CEOs. In the initial stages of business, it may not be financially viable to hire one of these professionals. You don’t have the budget to fit in an expert at procurement, so it’s not the right financial time to do so.
When is the right time?
- You have the budget to hire a professional
- You’re trying to find ways to save money
- Procurement is too much for the current team to handle
Business spending is important to the financial health of every business. Procurement professionals help control business spending and offer a strategic approach to the purchasing process.
4 Things to Look for in a Procurement Manager
When a business is confident that it’s time to hire someone to handle procurement, a few key factors to consider when hiring include:
- Analytical skills. Does the potential hire have strong analytical skills to make sense of the business’s big data, stock management and budget management?
- Experience. What level of expertise in procurement does the potential hire have? Does the individual have any experience with streamlining processes?
- Relationship-building skills. Relationships are the key to procurement success. The person a business hires must be able to develop relationships, negotiate contracts and communicate their needs effectively.
- Judgment. Do you trust the person’s judgment? Hiring managers must trust the judgment of the person they hire for procurement. The ultimate decision to hire is based on the trust of the manager’s judgment.
Hiring a procurement manager requires knowing whether the potential hire is a good fit for the business and has the critical skills necessary to excel in this position. If a larger company is hiring a manager, they’ll want to rely on the manager’s experience even more.
Entry-level managers are a good fit for smaller companies, where they can learn on the job and take more time. Senior-level managers are a good choice for larger businesses with multiple teams, divisions and offices that can benefit from a manager handling all purchases and contract negotiations.
Pros and Cons of Having a Procurement Manager
A purchasing manager is integral to a business’s operations, but there are pros and cons to hiring one. The pros and cons of having one of these managers on your team are:
- Get the best prices: Purchasing professionals don’t just make purchases. Instead, they make budget-conscious buying decisions to ensure that they get the best price possible from suppliers. These professionals will connect vendors with multiple departments, build lasting relationships with suppliers and work to get businesses the best prices on their goods and services.
- Supplier knowledge: If a non-manager is doing all of the company’s procurement, it can be difficult to get to know suppliers intimately. Businesses run on the back of relationships, and it’s up to these experts to have a running list of suppliers who can help fill in supply gaps as necessary. They also know which suppliers they can rely on for fast, efficient deliveries without any issues along the way.
- Negotiators: Procurement experts know how to negotiate the best prices, and they know the limits that they can push for because they have a full understanding of the average prices of goods and services. When a business grows, the managers will leverage their purchasing power to get bulk discounts.
- Quality control: Suppliers often try to cut costs, and the main drawback of these cost-cutting measures is that quality begins to suffer. Procurement professionals continually monitor the quality of all items to ensure that their employer’s goods and service quality don’t fall short of consumer expectations.
While there are a lot of benefits to hiring a procurement manager, there are also cons that must be considered.
- Added expenses: Smaller businesses may have a difficult time justifying the expense of a procurement manager. There is an upfront cost involved with hiring any employee, but the one thing to be cautious of is that despite the short-term hiring expense, the long-term savings outweigh these costs.
- Less flexibility: Procurement requires strict procedures and policies to keep quality high and costs down. One drawback of working with experts in procurement is that they follow these rules and have less flexibility than other buyers. For example, even if a supplier has a great deal that they offer to the business, the manager must go through all of the steps in their procedures before agreeing.
If you’re curious about the difference between a procurement manager, director, supervisor, and other designations, they’re all the same title for the same thing. Below is a list of the many names that these experts may be called.
Other Names for Procurement Manager
Procurement managers take on numerous roles, and some of the many titles for these professionals include:
- Procurement director
- Purchasing agent
- Purchasing director
- Purchasing supervisor
- Commodity manager
- Strategic sourcing director
- Head of procurement
- Chief of procurement
- Buyer / senior buyer
- Procurement advisor
You’ll also find some companies calling these professionals internal buyers, inhouse buyers, lead buyers and other designations. In all cases, these individuals all have the same main responsibilities as a procurement manager, even if the title is slightly different.
How Does a Procurement Manager Help?
Companies looking to expand their operations often question, “how does a procurement manager help our business?” The answer to this question is multi-faceted because there are dozens of ways that a professional in procurement can help businesses grow and reach their goals.
These professionals add business value in numerous ways, including but not limited to:
Businesses are always trying to find ways to reduce their costs. However, customers demand the same or better quality from the items that they purchase, even if a business must reduce costs.
Procurement managers help businesses reduce costs in numerous ways:
- Negotiate contracts to lower the overall price of goods
- Source information on suppliers to improve shipment times
- Reduce outgoing costs
- Minimize operational risks
Furthermore, managers work to ensure that businesses have the inventory and supplies necessary to meet demand. Companies that cannot keep up with demand inevitably lose money in the process.
When it comes to reducing costs while also limiting lost opportunities, these managers are integral to a business’s operations.
Sometimes procurement manager can negotiate the price of software, especially when they have access to pricing. Often there is room to get the cost lower on enterprise software like Asana, HelloSign, DocuSign, Lusha, Slack, Gong, Calendly, Box, Airtable, Loom, ActiveCampaign, Trello, and many more.
Innovation demands that you have the right products and inventory to innovate. Procurement managers ensure that businesses have the newest processes, technologies and equipment needed to be industry leaders.
Use Big Data
Data flows in and out of a business all day long. Some data is valuable, and other forms of data can be discarded. However, making decisions requires proper data analysis. For example, data can be used to learn which suppliers are best and those that routinely miss contractual deadlines and terms.
Using data can also assist with:
- Product development
Verifying data is growing in popularity and demand. Managers can help with data verification across teams and offices to provide accurate, data-driven information to decision-makers to lower risk exposure and reach goals faster.
Propel Growth in New Markets
Business growth into new, emerging markets can be difficult because it’s not uncommon to run into supply chain issues in the country or location. Suppliers have their limitations on where they can deliver products, and even if the items can be shipped, the additional cost can negatively impact profit margins.
Procurement professionals will work with business owners and managers to:
- Assess suppliers
- Contact suppliers
- Research supply and service costs
Managers work to develop a hub of information that can help businesses make informed decisions when expanding or growing in new markets. Having a central hub of supplier information and costs is invaluable to a business.
Maintain Corporate Social Responsibility
Corporate social responsibility is on the uptick, and the value it has to businesses is immense. Supply chain issues impact local and global companies, and it’s up to the procurement manager to:
- Obtain supplier information
- Validate supplier information
- Conduct audits
Reputation for being a business that meets contractual obligations and consumer demand will drive more revenue to a business. Procurement experts help companies maintain their social responsibility and meet the demands of business supply chains.
Procurement is crucial to every business’s operation. When you need to source inventory, goods and services, these professionals work to negotiate the best deals, stay within budget and help companies fulfill customer demand.
In the long-term, procurement managers help keep operations running smoothly, save businesses money and negotiate contractors that are in a business’s favor.
Check out out software evaluation guide when buying new software.