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Procurement - noun

(pro·​cure·​ment)

1: the act of procuring

2: the purchasing, leasing, renting, or selling of materials, services, equipment, or construction

“Procurement.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/procurement. Accessed 29 Mar. 2023.

procurement

vs

Purchasing

   Procurement

  • Strategic Function

  • Focus on overall value

  • Proactive strategy

  • Identify future need(s)

   Purchasing

  • Tactical Function

  • Focus on price

  • Reactive strategy

  • Manages immediate need(s)

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Direct vs Indirect

  • Direct procurement refers to acquiring something needed to produce an end product.  This could be raw materials, components or a product or services that is resold to a customer. Anything related to the cost of goods sold.

  • Indirect procurement refers to purchases of product and services that are needed for day-to-day operations but don’t directly contribute to the company’s revenue. This can include things like Laptops, Software, office supplies, consulting services and maintenance.

  • Services procurement used for both direct and indirect procurement. Examples include contingent Labor, Consulting services, individual contractors and managed services.  

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five steps in the procurement Process

Step 1

 

Identify Need

 

Step 2

 

Create Request

 

Step 3

 

Vendor Evaluation & Selection

Step 4

 

Negotiate

Price & Term

Step 5

 

Create

Purchase Order

WHY PROCUREMENT

  • Impacts Your Bottomline: Effective procurement structure and strategies result in cost controls, savings and ultimately increased profitability.

  • Cross Functional Visibility: Procurement is a shared services organization that helps connect the dots.  

  • Organizational Success:  Acquiring the product and services in a timely manner so that ongoing projects are successfully completed. 

  • Improved Budgeting:  Strategic procurement practices include third party spend category planning. Forecasting results in improved budgeting

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