Procurement is one of the most critical aspects for any consumer. We do procurement everyday whether knowingly or unknowingly. There are some important facts to know if you want to be effective at procurement especially in construction because we need the right material for the right job. The traditional way to procure is to go to a supplier and order. There are three ways to procure which are cash, credit and economies of scale. Cash is the most convenient source for procurement as there is no hassle and also there is room for negotiation. When you are dealing in cash you always bargain to reduce the price as you are giving them the money on the spot. Cash is mostly used for the procurement of daily goods from a one time supplier. There is no attempt to establish long term relations with the supplier as goods procured are not of significant monetary value.
Second way of procurement is on credit and is mostly used for organizations or contractors that buy in large quantities. Buying material on credit can be relatively difficult as vendors look at your market history and reputation before making a decision. If your reputation is not up to the mark then the vendors will charge you a premium for their products. When you are dealing in credit you mostly negotiate on lead time and not on price. The third way of procuring is using economies of scale to buy in bulk. This is mostly done by large organizations and contractors as they are moving incredibly large volumes. In this type of procurement the consumers look to establish long term relations with the vendors to ensure a competitive edge over its competitors. Consumers often look to negotiate both on price and lead time. Since the consumer is dealing in large volume it is important to have proper contract management. If you have no proper contract then in case of any loss you are solely liable for the damages so it is extremely crucial to maintain proper contract management.
