Procurement Manager Interview Questions

1. What is Procurement?

Procurement is the process of finding and acquiring the required goods & services from external sources.

For this, you agree to some terms and conditions with the suppliers and since the goods or services are to be procured in bulk usually, you choose the supplier by issuing tenders or through competitive bidding process.

Procurement can be divided into two types -

i.) Direct procurement
ii.) Indirect procurement.

Direct procurement means the procurement of goods that’ll be used directly in production. For e.g. the raw material etc.

While indirect procurement refers to the purchase of goods and services that facilitate the running of business or conversion of raw material into finished product. For e.g. Any maintenance, repair and operating supplies would fall into this category.

2. What is the importance of procurement in an organization?

Procurement is a very important process for any organization for three reasons:

i.) Managing the expenses - It is this department that gets the buying plans for the year,  purchasing processes and cost reduction strategies in place .

ii.) Ensuring unhindered production - By ensuring the availability of quality material at the right time and optimal cost.

iii.) Protection against risks - By deploying various risk management strategies like FMEA, price shock mitigation etc.

3. What are Purchase Orders? What is their importance in the whole process?

Purchase order is a document that symbolizes the official confirmation of an order from a buyer to a vendor.

It carries the details of the buyer, product, its specifications, quantity, agreed price and terms of delivery among other things.

The companies issue a purchase order for following reasons:

i.) Formal communication of expectations for both the parties. In case of any dispute or discrepancies they can go back to this purchase order.

ii.) Purchase orders also work as a medium of formal communication between the employees managing the orders

iii.) They also help in budgeting and maintaining Accounts Payable

iv.) Purchase orders are also the instruments used by auditors while auditing your account

v.) In many countries a Purchase order is also treated as a legal binding for both the parties.

4. How is a Purchase order different from an invoice?

Well, Purchase Order and Invoice are two different documents used in the process of buying and selling.
While Purchase order originates at the beginning of the buying process, initiated at the buyer’s end and confirms the order, an invoice originates at seller’s end and requests to release the payment as per the terms and conditions agreed upon.

5. What are the important stages of Procurement cycle?

Some of the important stages of a procurement cycle are:

i.) Need Analysis
ii.) Releasing the tenders
iii.) Vendor evaluation, selection - Awarding the contract
iv.) Raising the PO
v.) Receiving the invoice and releasing the payment
vi.) Receiving the order - Quality check
vii.) Warehouse Management

6. Do you have any tips to maintain a good relationship with your suppliers?

Well, if you want your supply chain and production to work smoothly, your suppliers or vendors are the most important part of it.

To maintain a good relationship with your suppliers, following are certain things that I have experienced to work well:

i.) Evaluate and choose your suppliers well. Make sure that their work culture suits yours.

ii.) Make them a part of your process. Keep them updated about any changes in your processes or plans that affect them. It’ll help them get prepared better.

iii.) Make detailed agreements of business relationship with them. Have clear terms and conditions to guide the work. This makes it easier for both the parties to understand the expectations from each other and reduces confusion

iv.) Develop a relationship of trust. Have an open system of communication so that they know what’s working and what’s not.

v.) Ensure that their payments are released on time. Understand that they also have bills and salaries to pay.

vi.) Invest in a good SRM (Supplier Relationship Management) software. It helps you keep the things streamlined.

7. What are some of the best practices you would advise your junior procurement managers to follow while getting a vendor onboard?

Understand this question as “What are the best practices you would follow to get a vendor onboard?”

To ensure that you can rely on a vendor & that they deliver as per your expectations, following are some of the best practices I have found to work:

i.) Evaluate the supplier well for their goods, pricing, delivery, commitment and all other things that are important to you in the relationship.

ii.) Check their ratings - Many credit rating agencies maintain a list of ratings to the supplier. These ratings help you evaluate your registered suppliers well.

iii.) Meet them in person - As far a possible. If not, an Internet call would also work. This helps you understand them as people.

iv.) Conduct a site visit - this helps you ensure that what they claim is actually what they are.

v.) Negotiate the agreement to get the best deal in terms of pricing, payment terms, material, delivery conditions etc.

vi.) Conduct a review of your agreement with your suppliers periodically to ensure that you are working with them as per the latest market conditions.

8. What do you think are the main advantages of digitization in procurement?

Like any other department, digitization is becoming an important part of procurement as well. If implemented correctly, following are the advantages it can bring to a company:

i.) Improved productivity with internal customers being able to see and order the low value goods for themselves.

ii.) Improved efficiency of procurement staff with all the information available easily to check and act like the status of an order, available vendors for an order, their ratings etc.

iii.) Reduced cost

iv.) Better reporting and supplier relations

v.) Green initiative

9. What are some common risks that procurement often faces?

Well, as we have seen, procurement is one of the most important tasks in the process of timely production. But, there are some common risks it faces -

i. Inaccurate analysis of needs - This is one of the most common risks where you either underestimate or overestimate your requirement and place the order. As a result, you either fall short of material or land up blocking your money by buying too much.

ii. Lack of formal practices of selecting and managing your vendors – Many companies still don’t have formal practices and processes in place to procure their goods. This makes them land up with unreliable vendors who either don’t fulfill their commitment or are costly.

iii. Practices of your suppliers that are unfriendly to the environment - The final product you send out to the market depends on the raw material you use. Any unethical practices of your supplier can damage the brand of your product too. In the present times, this is also an important thing to see while finalizing your vendors

iv. Any purchases that are made outside the normal buying process - When the purchases are made in a hurry or under some influence, the results are often undesirable. Most of the times, you either compromise on the quality or the price.

v. Insufficient and inaccurate data - For the organizations whose procurement process is still not digitized, there’s a lack of accurate data to refer to which forms a basis for making correct decisions.

vi. Gaps in tactical and strategic skills of procurement staff - And, this lack can lead to the company making wrong procurement decisions.

10. What are some of the top trends that have begun to show up lately in the procurement process?

Well, the way of doing business is changing everywhere, procurement is also not untouched.

Some of the changes that have begun to show up lately in this domain are:

i.) Digitization of the process and use of past data to deal with future. This has improved both the accuracy and the efficiency of the process.

ii.) Falling human intervention with Artificial Intelligence and Robots making an entry into the domain

iii.) Use of Cloud based technologies so that the companies do not have to invest in heavy infrastructure.

iv.) More focus on ethics and compliance with environmental norms. Greener initiatives are becoming more popular.

v.) Focus on supplier relationships - The suppliers are no more just the providers of raw materials, judged on the basis of price. They are more more like the partners now, integrated into the process right from the beginning.

vi.) Hiring and creating right talent - that is digitally skilled for the company to start moving its operations in technical direction.

vii.) Contingency planning to deal with the risks