The procurement department is closely linked with logistics and warehousing. It is often an overlooked and underestimated area, yet it has a significant impact on the project execution process. In large procurement departments, many roles can be distinguished – from buyer and category manager to director.
At Sii Poland, the procurement department plays a particularly important role in project procurement, which I will present in this article using the example of Assembly Services.
A bit of history
Until the 1980s, procurement departments’ role was limited to supply and administrative activities. Teams were mainly composed of people who bought products based on immediate needs and on the spot, often “next door.” At that time, no one cared about commercial terms because “who needs that?” Armed with a wad of cash, an employee would head out in a delivery vehicle and bring materials to production, and the invoice (if there was one) went to administration.
A small breakthrough came in the 1990s, when the first mentions of the so-called supply chain began to appear. The Japanese are considered pioneers in procurement and logistics awareness. From them come the principles we all know:
- Just in Time (JIT)
- Kaizen
- Total Quality Management (TQM)
The years 2000-2010 marked a revolution in procurement. New positions, responsibilities, and expanded structures emerged, such as Buyer, Procurement Specialist, Category Manager, and many others. The procurement function started to be seen as strategic, with a real impact on project financial results, stemming from procurement analysis, conscious supplier relationship building, and diversification of domestic and international markets.
Procurement today
Procurement and logistics have evolved along with global access to goods in the internet age. This was influenced by globalization, greater product availability, market awareness, and the diversity of projects and delivery of finished products to foreign markets.
People working in “Procurement” not only need to be skilled in sourcing but also have an open mind for industry innovations, observe global situations and currency exchange rates, and listen to numerous internal clients they work with daily (e.g., accounting, documentation, engineers, managers, and many others).
Market and global situation analysis
The phrase “observe the global situation” may sound lofty, but it will make sense when I give two recent examples.
COVID-19 pandemic and the Suez Canal blockage
We all remember the time when people were confined at home and companies were closed to employees. Many factories in China, where most components for the global economy are produced, were shut down. Ports were either closed or operating under heavy restrictions – as a result, few products reached Europe and the rest of the world.
After restarting operations, it took nearly two years to resume production and normalize the supply chain. Many buyers struggled with material availability and exorbitant prices across all industries during this time.
As the market adapted to pandemic conditions, another major event disrupted the supply chain again.
A significant challenge was the Ever Given container ship’s six-day blockage of the Suez Canal. This event greatly impacted the process and cost of delivering goods from the Far East to the rest of the world.
Consequences
The numbers show the scale of the impact. During the early phase of the pandemic, the cost of shipping a container from China to Europe rose from $2,000 (pre-pandemic) to as much as $15,000. Similarly, the Ever Given incident caused freight costs to increase by 115% to 500%.
The main reasons were:
- fewer ships available on that route,
- lack of containers stuck in other ports,
- limited human resources at ports, hindering efficient handling,
- disrupted rotation cycles of large container ships,
- reduced production and smaller shipment batches.
Interestingly, demand did not decrease, as everyone needed products for ongoing projects. No one knew how long the situation would last. And what did procurement departments do? They ordered, paid, and waited…
Procurement and Logistics Department in Assembly Services
The procurement department at the Engineering Competency Center at Sii Poland has existed since 2018. Initially, I was its only employee, although I received support from the Procurement department located in Warsaw. At that time, we were launching a new business profile – machine assembly in the hall in Gdańsk.
Within the CC Engineering structure, there was a need for someone with experience in production procurement who could take care of project needs. I met those criteria.
It wasn’t easy, as we had no supplier database, established work system, or solid bill of materials. We also had to find a way to control deliveries and orders, as the AX system alone was insufficient. It quickly became clear that this was not a one-person job, so the first warehouseman, Łukasz, joined my team soon after, and we’ve been working in sync ever since.
Stages of project procurement work
As the person responsible for project procurement, I participate in many processes across several stages, from consultations to project completion.
Pre-project consultations
Before starting the project estimation, I participate in consultations to assess whether the project is feasible from a procurement and warehousing perspective. I ask the Client questions, analyze material availability on the market, equipment rental costs in various regions of Europe, the Client’s bill of materials, and costs related to deliveries, transport, and customs clearance.
Estimation process
Once I decide to prepare a general quote for the Client, I begin estimating the materials needed for implementation, such as kilometers of cables, cable trays, and other installation components.
These topics vary greatly depending on the Client’s profile, as each industry has its own requirements (e.g., the food industry requires different types of materials with different properties than transport systems, warehousing, or the automotive sector).
In addition to materials, I also estimate the necessary equipment for project execution, such as cranes, hoists, forklifts, scissor lifts, and even social facilities for workers, like containers with furnishings.
At this stage, I work closely with the delivery manager or the assembly competence leader, as they provide the specifications for the required infrastructure, tools, and equipment.
After several years of cooperation, we already have a defined action plan – we know what data we need and how to share it.
The delivery manager organizes project meetings, a dedicated MS Teams channel is created for the project, and we have a bill of materials (BOM) specifically for project estimations.
Sometimes, estimations are risky because they are prepared well in advance. This means final prices may differ from the initial ones, or equipment availability at the time of the actual order may change. Even the currency exchange rate used in the estimation process may fluctuate.
I strive to minimize these risks by negotiating commercial terms and securing prices at a fixed level for a defined period. How can this be achieved? For example, by extending the validity of an offer or freezing the exchange rate on the day the offer is made.
As a procurement specialist, I also significantly impact the success of the bidding process and the project overall.
In large intralogistics projects, the value of materials can account for 10–12% of the total project value. When we add equipment rental and tool purchases, this can reach up to 15%. Every saving counts in this area.
Client negotiation processes
Many people associate procurement with negotiations – and rightly so – but it’s also essential to ensure timely deliveries.
As a Senior Procurement Specialist, I’m responsible for long-term relationships with key suppliers. These relationships are built over the years and influence material prices, better commercial terms, extended payment deadlines, and the availability of materials and relationships with manufacturers. This ensured our deliveries, for example, during the pandemic.
Material prices are very important, but delivery timelines are also crucial. Without the necessary materials, we can disrupt the project schedule – and that can cost the company more than the negotiated discounts.
Bidding processes usually take time and are conducted between the Delivery Manager and the Client. However, the most common reason for prolonged negotiations is money. And where is the money? For example, procurement and rentals comprise 10-15% of the total project value.
In such cases, we try to find optimal solutions to reduce costs with the Delivery Manager and the Assembly Competence Leader. We review the bill of materials with the assembly leaders and simultaneously ask our suppliers for substitute proposals – because they have the best knowledge of their products. We aim to match the same properties, recalculate required quantities, and look for alternative suppliers, not only in Poland.
The same applies to equipment rental. The Assembly Leader and Delivery Manager review the work schedule and reanalyze equipment needs for each project stage. Sometimes we can reduce the equipment needed or plan its availability in phases.
Meanwhile, I search the market to diversify suppliers or negotiate pricing terms with existing ones. I analyze demand by combining material and equipment deliveries and other order-related costs, such as insurance, equipment inspections, etc.
Project execution
When the project moves into the execution phase, we begin operations as early as possible. We must keep delivery timelines in mind, as these are often items made specifically for our order, meaning the factory must produce them for us.
Half of my work involves planning deliveries and “putting out fires” when deadlines are missed. The other half consists of placing orders and reordering materials during the project.
Depending on how much time has passed since the estimation, we need to review all offers, check their validity, and re-inquire about available resources. Even extended offers lose relevance, as there are cases where a project enters execution a year after the estimation.
As mentioned earlier, each project has its own communication channel. During execution, this channel transforms into a project channel where technical files and a folder with procurement and logistics documents (e.g., offers and orders) are stored.
There is also a bill of materials with separate tabs indicating the type of demand – e.g., electrical items, mechanical items, rentals.
Procurement, warehouse, assembly leaders, and delivery managers use this file throughout the project.
At the start of the project, all necessary products are listed according to the principle of name, product code, and quantity.
Then, our warehouse verifies the list by checking what materials we already have in stock (we maintain reserves of the most commonly used components). Next, I analyze the list, divide products by manufacturer and supplier, count quantities, and send inquiries to suppliers based on their business profiles.
We are required to follow internal procurement procedures for every purchase. Depending on the product type, we must obtain at least three offers, sometimes even six.
Exceptions include items covered by a dedicated supplier, manufacturer, or a supplier with whom we have a framework agreement for specific products.
After placing an order, we also need to manage delivery methods, locations, and the total product cost – the so-called TCO (Total Cost of Ownership) – not just the unit price.
Sometimes orders include additional costs such as packaging, cable cutting, transport, insurance, customs duties, etc. It’s important to be aware of these expenses and maintain control over them during the estimation phase. If they were hidden costs, they should be minimized through additional negotiations, market diversification, or by requesting the supplier to cancel costs not included in the original offer.
This cycle repeats in varying degrees throughout the duration of the project.
Project work can be dynamic, as the planned item may not be correctly selected or ordered in sufficient quantity. Every order becomes urgent in such cases, and we rely on supplier relationships to help us in critical situations.
Project completion
The final stage of the project involves counting leftover materials. The warehouseman on-site or the assembly leader counts the materials, and I receive a list that I may be able to return to the supplier, thereby reducing costs.The ideal situation is when no materials remain, and we return from the project with only our tools.
Summary
Project procurement work is interesting, dynamic, and sometimes stressful, but personally, I enjoy it when a lot is going on. I value my responsibilities because I know they have a real impact on the project’s success, cost, savings, delivery timelines, and crisis management.
In this role, you collaborate with many people – both internal and external clients. Depending on the country where the project is carried out, these may be different personalities or work cultures. This helps develop diplomacy and enriches our communication style.
New AI tools can facilitate communication but will never replace face-to-face contact with a supplier or a phone call to resolve something “right away.” That’s why people working in procurement must be bold, communicative, analytical, and capable of making quick decisions, because sometimes offers are valid for only an hour.
Today, procurement departments are not just about finding a product but also about maintaining long-term cooperation with strategic suppliers, conducting deep market analyses, and seeking the best suppliers and delivery conditions.
Writing this article confirmed my belief that project procurement and logistics are vast topics. I’ve thought of several threads I could explore and write about. If you’d like to know more or are curious about the details, comment!
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