In today’s purchasing transactions, we often have confusion between purchasing and procurement. However, these two concepts are different because they have distinct properties. In this article, we will provide some information to help you answer the question: what is procurement.
What is procurement?
It is the act of getting products or services, ordinarily for business purposes. It is most commonly related to businesses since companies get to request services or buy merchandise, ordinarily on a generally expansive scale.
To answer the question of what is procurement, we can understand that procurement refers to the ultimate act of acquiring but can also incorporate the procurement process in general, which can be fundamentally critical for companies driving up to their last purchasing choice. Companies can be on both sides of the process as buyers or vendors in spite of the fact that here we basically focus on the side of the requesting company.
Benefits in business
Procurement is a critical step in understanding supply chains since it helps a company discover dependable providers that can give competitively priced products and services to coordinate the company’s needs. That’s the case whether the company is looking for raw materials for manufacturing, a marketing services supplier, or modern office supplies.
For illustration, in case a company needs a new supplier to supply a continuous service for an inconclusive period of time — such as an email security arrangement — the process helps the company select the provider that best meets all of the business’s necessities at a sensible price. It empowers the business to maintain a strategic distance from sitting around, managing idly cash and profitable resources with an insufficient supplier.
Types of Procurement
There are 3 main types of procurement: Direct, Indirect and Service
Direct procurement is the direct purchase of raw materials, machinery and wholesale goods that contribute directly to the company’s final product. The main stakeholders in this process are the purchasing officers and contracted suppliers. Meanwhile, Indirect procurement is the purchase of goods such as office supplies. These goods do not directly affect the final product or the bottom line of the company, but they support the day-to-day management of the business. In addition, Service procurement includes hiring temporary staff, hiring software, and bringing in short-term vendors to work at an event or conference.
To answer the question: what is procurement, you need to understand its process. Like other business activities, it also has a process. First, you have to determine needs. This means you need to identify the quality, quantity and other related requirements of demands.
After identifying the need, you need to develop a strategy. Besides, you need to search and identify potential suppliers with reasonable prices. You need to negotiate with the supplier about the price carefully to make sure there are no problems.
Procurement is the most general and complete concept, covering the concept of Purchasing. All of them are important activities in the supply chain of enterprises. We hope that knowing the meaning and usage of these terms will make your work easier.
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