What is Procurement?
Procurement is the acquisition of goods, services or works from an outside external source. It is favourable that the goods, services or works are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location.
Procurement Steps
- Supplier Identification
- Identify who can provide the required product/service.
- Supplier Communication
- Requests for quotation, requests for proposals, requests for information or requests for tender may be advertised, or direct contact may be made with the suppliers.
- Negotiation
- Negotiations are undertaken, and price, availability, and customization possibilities are established. Delivery schedules are negotiated, and a contract to acquire the P/S is completed.
- Logistics Management
- Supplier preparation, expediting, shipment, delivery, and payment for the P/S are completed, based on contract terms.
Procurement outsourcing
Procurement outsourcing is the transfer of specified key procurement activities relating to sourcing and supplier management to a third party.
Overview
Outsourced procurement teams allow companies to benefit immediately from experienced procurement specialists support & expertise. This avoids the creation of an internal team (new resources) and the required time for that team to structure itself, its processes and its expertise.
Outsourced procurement is therefore an available solution for companies who :
- Have no internal competencies but want to quickly benefit from procurement action (Cost reduction, suppliers and contract management...)
- Have internal procurement expertise (department) but want to outsource activity on specific area(s) like indirect materials and services.
- Consider Procurement as a non strategic / core function and want to have it managed by a procurement service provider
- Want to develop quickly a procurement function to deliver savings, with a willingness to internally develop this function in the mid term