What is procurement?
Procurement is the process an organization uses to find, acquire, and pay for the goods, services, or works it needs to operate. It starts when a need is identified and ends when the supplier is paid and the item or service is delivered.
Let's break it down
- Identify the need: Someone spots a requirement (e.g., new laptops).
- Define specifications: Detail exactly what is needed (features, quantity, quality).
- Search for suppliers: Look for companies that can provide the item.
- Request proposals/quotes: Ask suppliers to submit offers.
- Evaluate offers: Compare price, quality, delivery time, and other factors.
- Negotiate terms: Agree on price, payment, warranties, etc.
- Issue purchase order: Formal document that confirms the purchase.
- Receive goods/services: Check that what arrives matches the order.
- Process invoice and payment: Verify the bill and pay the supplier.
- Record and review: Store data for future analysis and compliance.
Why does it matter?
Good procurement saves money, ensures the right quality, reduces risk of delays or failures, keeps the organization compliant with laws and policies, and builds reliable relationships with suppliers. It also provides data that helps leaders make smarter spending decisions.
Where is it used?
Every sector that buys something uses procurement: manufacturing plants buying raw materials, IT departments purchasing software licenses, hospitals acquiring medical equipment, schools ordering books, governments contracting construction projects, and startups sourcing cloud services. In tech, procurement handles hardware, SaaS subscriptions, development tools, and consulting services.
Good things about it
- Cost control: Competitive bidding often lowers prices.
- Quality assurance: Standards and specifications keep products reliable.
- Transparency: Clear steps reduce favoritism and fraud.
- Supplier relationships: Strong ties can lead to better service and innovation.
- Data insights: Modern e‑procurement tools give analytics for smarter budgeting.
- Efficiency: Automation speeds up ordering and reduces paperwork.
Not-so-good things
- Bureaucracy: Too many approvals can slow down urgent purchases.
- Complexity: Managing many suppliers and contracts requires expertise.
- Upfront investment: Setting up e‑procurement systems can be costly.
- Over‑reliance: Dependence on a single supplier can create risk if they fail.
- Potential for misuse: Without proper controls, procurement can be a channel for corruption.
- Resistance to change: Employees may cling to old manual processes.