Procurement

Overview

Procurement is the process of finding and agreeing to terms, and acquiring goods, services, or works from an external source, often via a tendering or competitive bidding process. Procurement is used to ensure the buyer receives goods, services, or works at the best possible price when aspects such as quality, quantity, time, and location are compared Procurement Process.

History

The practice of procurement has been integral to trade and business since the dawn of civilization. The earliest evidence of procurement practices can be traced back to ancient Mesopotamia, where records suggest that beer was used as a form of currency in exchange for goods and services Ancient Procurement Practices.

Types of Procurement

There are several types of procurement, each with its unique processes and considerations. These include direct procurement, indirect procurement, services procurement, and public procurement Different Procurement Types.

Direct Procurement

Direct procurement involves the purchasing of goods, materials, and services directly related to the production of goods or services that a company is offering. This type of procurement is often tied to the company's production processes and has a direct impact on their revenue Understanding Direct Procurement.

Indirect Procurement

Indirect procurement, on the other hand, involves the acquisition of goods and services that are not directly tied to a company's production process. These can include office supplies, cleaning services, and IT equipment Indirect Procurement Explained.

Services Procurement

Services procurement involves the sourcing of services rather than physical goods. These services can range from consulting and professional services to maintenance and support services Services Procurement Overview.

Public Procurement

Public procurement is the procurement process conducted by government agencies and public sector organizations. This process is often subject to regulations and laws to ensure fairness and transparency Public Procurement Principles.

Procurement Process

The procurement process typically involves several key steps, including need identification, supplier identification, negotiation, contract award, delivery, and payment Procurement Process Steps.

Need Identification

The first step in the procurement process is identifying the need for a particular good or service. This involves determining the specifications of the product or service, the quantity required, and the timeframe for delivery Identifying Procurement Needs.

Supplier Identification

Once the need has been identified, the next step is to identify potential suppliers. This involves researching and evaluating suppliers based on factors such as price, quality, reliability, and delivery times Finding Suitable Suppliers.

Negotiation

After potential suppliers have been identified, the next step is negotiation. This involves discussing terms and conditions, prices, delivery times, and other key aspects of the contract Negotiation in Procurement.

Contract Award

Once the negotiation process is complete, the contract is awarded to the supplier. This involves formalizing the agreement and setting out the terms and conditions of the contract Awarding Procurement Contracts.

Delivery

After the contract has been awarded, the next step is delivery. This involves the supplier delivering the goods or services according to the terms of the contract Delivery in Procurement.

Payment

The final step in the procurement process is payment. This involves the buyer paying the supplier according to the terms of the contract Payment in Procurement.

Procurement Strategies

There are several procurement strategies that organizations can use to optimize their procurement processes. These include centralized procurement, decentralized procurement, consortium procurement, and green procurement Different Procurement Strategies.