Procurement

Procurement is the process of obtaining goods, services, or works from external sources. It covers the identification of needs, specification of requirements, market research, supplier selection, contracting, and ongoing supplier management. While purchasing is a transactional component of procurement, the term procurement also includes strategic activities such as spend analysis, supplier relationship management, and risk mitigation.

Procurement typically involves several stages: need recognition and specification, supplier market engagement, solicitation and bid evaluation, contract award, performance monitoring, and payment. It aims to secure the right quality, quantity, time, and price while complying with legal and ethical standards. Indirect and direct procurement describe different spend areas: direct procurement relates to inputs for production, while indirect procurement covers goods and services used in day-to-day operations.

Organizations may use various procurement methods, including competitive bidding, requests for proposals or quotations, and framework agreements. E-procurement systems automate many steps, from catalog management to purchase orders and invoicing, supporting transparency and control. Strategic procurement emphasizes total cost of ownership, supplier development, and long-term value beyond the lowest unit price.

Governance and roles include procurement departments, procurement professionals such as buyers and contract managers, and policy frameworks that promote ethics, compliance, and risk management. Trends in procurement include digitalization, data analytics, sustainability, supplier diversity, and resilient supply chains, all aiming to improve efficiency, reduce risk, and align purchases with organizational objectives.