Procurement refers to the process of purchasing goods and services a business needs to meet their goals. Procurement is an essential part of any business: All companies need to purchase goods or services - from raw materials to office supplies - on a relatively large scale to ensure that their business runs smoothly.
The procurement process involves sourcing, requisitioning and purchasing goods and services. An effective procurement process is one that ensures that the buyer receives goods and services at the best possible price while considering important aspects such as quality, quantity, delivery time and location.
The procurement process will vary depending on what the company needs to purchase. For some items, requisitioning can be as easy as a phone call or a click. For other items, requisitioning can be complex and require multiple quotations, competitive bidding, and negotiations with vendors.
Essentially, the procurement process can be divided into two main types of processes depending on what type of goods or services are being procured and how large or complex the transaction is: Strategic procurement (also sometimes refered to as strategic sourcing) and spot procurement (also sometimes called spot buying or spot purchasing).
Strategic procurement is usually of complex or high-value items, and often subject to more intensive negotiations and scrutiny. The items purchased require higher price confidentiality and more detailed quality and technical specifications.
The suppliers of these items are limited in number, competitively sourced, and usually involve cultivating long-term relationships. Procurement is frequently done through longer term contracts, or purchase orders issued as a sub-document of a larger master agreement.
Spot procurement involves the purchases of products and services outside of a long-term purchase contract with a regular supplier.
Spot procurement is usually short-cycle procurement, executed through a purchase order and does not require a long-term contract. It covers ad-hoc purchases, emergency buys, and procurement of low ticket, low complexity products either in new categories or from suppliers with whom the company does not deal regularly.
Strategic procurement - All direct spend categories are covered through strategic procurement. These include all the raw materials that a company like Coldchain Autos would require to make refrigerators, for example, such as raw materials, core plant and equipment items. Some indirect spend categories are also included in strategic procurement such as machine parts and large ticket routine purchases from regular suppliers.
Spot procurement - Most indirect spending is purchased through spot procurement. Spot procurement includes products that are common to all industries and companies such as stationery, office equipment, cafeteria items, but also spare parts, maintenance parts, etc.
Companies can use eprocurement solutions for all kinds of procurement. Proqura allows users to conduct basic spot procurement of commoditized or standard items for immediate use as well as creating long-term contracts to lock in fixed rates for a pre-defined period.