Procurement definition
Procurement is a vital business function, responsible for securing all the goods and services needed by an organization. For manufacturing companies, supply availability is particularly critical as it’s impossible to create finished goods without the necessary materials. Procurement departments must liaise with internal stakeholders to gather their forecasts and requirements, and then source the best suppliers at the best cost.
Types of procurement management
There are four main types of procurement:
Direct procurement: This includes procuring anything that directly supports the production of the goods a company sells, including raw materials, components, parts, services, and wholesale items. These all have an impact upon revenue, growth, and reputation, so supplier relationships are crucial in direct procurement.
Indirect procurement: Anything not directly related to production, including materials, goods, and services for internal use and daily business operations, falls under indirect procurement. This includes items such as office supplies, utilities, and travel expenses.
Goods procurement: Both direct and indirect procurement can fall under goods procurement, which includes procuring any tangible object, whether finished or unfinished – everything from equipment to raw materials to office chairs.
Services procurement: Professional, people-based services such as consultancies, agencies, law firms, outsourced IT, security services, software as a service (SaaS) delivery, and facilities repair all fall under services procurement. These are necessary for efficient workflow and filling in any workforce gaps.
