Ever wondered what the title of the article is all about, well I would try to familiarize you how these two concepts that can be utilized for each other. Procurement is a function including but not limited to purchasing, supplier relationship management, whereas Project Management is concerned with methods to manage any temporary endeavour that creates a unique result in the form of a change, service or a product. Thus project management is used when any organization has to make, add, change or delete.
Projects are becoming complex and organizations may not have required skills to finish certain parts of project, for which they create a Procurement statement of work, and that part is procured from a vendor after developing a valid contract.
The Knowledge area in Project Management concerned with handling procurement is called Procurement Management, wherein a Project manager is responsible for planning, conducting, monitoring procurement and finally closing the procurement. All buy or make decision is made in planning phase of this knowledge, along with what needs to be procured. Vendor selection happens in the conduct procurement stage and all procurement audit happens in the monitor procurement.
Whereas Procurement as a separate function has its own set of responsibilities like purchasing, vendor selection, supplier evaluation, sourcing strategy etc. Procurement is responsible for controlling cost of the final product as its purchasing strategy directly influences price of the end product. With system engineering, value analysis and should cost analysis organization are identifying opportunities to decrease cost. To implement cost cutting, procurement has to suggest re-engineering of material to their suppliers (engine components in case of an engine manufacturer). Other ways to decrease cost of procured material is by changing the supply chain and making it more effective or changing the manufacturing processes(developing your suppliers) of your supplier to make it more cost effective. All these changes could not be included in operational activities and as they require constant changes, adding and deleting, so Project Management is the boon to handle these improvements. Thus procurement has multiple project running to improve procurement in terms of cost, quality, processes, supply chain etc. These projects may not be as complex and costly as a construction projects, but they still require know how of the Project Management.
Thus a procurement department handles project within its department and it also supports any project running in the organization that requires procurement. Project and Contract managers coordinate with each other to conduct procurement for a project, wherein the role of project manager is to help contract manager develop a contract by including all requirements for the project. Further, the success of procurement also hangs on the contract, highly skilled vendors could cause procurement to fail, if the contract is not strong and detailed to cover all the clauses. No wonders then why Contract were awarded Nobel Prize in 2016. But we would not now deviate to the topic of contract, and end on the note that Procurement and Project Management can be utilized for each other.
