What Is Procurement?

So you want a career in procurement? Well, procurement has been part of transactions since the dawn of time. Today, businesses employ a purchasing manager to head up purchasing and procurement efficiency and cost-effectively. 

Procurement is the day-to-day selecting and purchasing of goods and services. The lower the procurement cost, the more money the business saves, and it plays a crucial role in the company's success. 

These goods and services usually are inputted into the final product the business produces. Procurement specialists follow strategies to find innovative ways to save the business time, energy, and money. 

An in-depth understanding of procurement will help to understand supply chains. This guide will share the stages of the procurement process, explain procurement vs. sourcing, and share how to become a procurement manager.

What is procurement management?

Procurement involves strategic sourcing and purchasing, and it is crucial for understanding supply chain management. Every business takes part in procurement: sourcing raw materials for manufacturing or investing in new office equipment.

A procurement team’s duties include spending analytically to improve cost savings. A procurement manager must protect good relationships with suppliers to source reliable and quality products at low prices. 

Procurement maintains the cost efficiency and quality of the products and services purchased along the supply chain. There are four different types of procurement, these being: direct, indirect, goods, and services:

1. Direct procurement

Any procurement of a material or component to produce a final product involves buying raw materials to manufacture or purchasing products to sell in retail shops.

2. Indirect procurement

This procurement process includes everything the business might buy that doesn’t form the final end-product, and this involves office supplies, advertisement, and professional consultancy. 

3. Goods procurement

These procurement functions include tangible products and software subscriptions, such as raw materials and computer programs. It can be part of direct and indirect procurement. 

Practical goods procurement helps the company’s overall objective lower costs and maintain efficient supply chain management. 

4. Services procurement

Service procurement includes all people-based services, which can be internally or externally hired services, such as technical consulting agencies, marketing companies, or maintenance services.

How does the procurement process work?

The procurement process does not end with the sourcing of the product. Procurement specialists negotiate contracts, approve purchases and receive the goods and services. 

There are three aspects to the procurement process: people, process, and paperwork. People are in control of the manual decisions, authorizing and initiating each step. 

The process is often strategic at keeping costs down, ensuring delivery of supplies within the correct timeline. Paperwork maintains every record of procurements, so the business is accountable for its actions.

The procurement principles include: 

  • Value for money.

  • Fairness.

  • Competition.

  • Efficiency.

  • Transparency.

  • Integrity.

  • Accountability.

Supply managers must conduct a cost analysis and make competitive bids to ensure the efficiency of the business. Procurement managers must remain fair, transparent, and accountable for their actions. 

What is procurement vs. purchasing?

Some businesses label procurement and purchasing under the same term, and others differentiate between the two.

While procurement is the sourcing, buying, and receiving of goods and services, purchasing is the payment process. The accounts payable team conducts the transference of money for goods. 

The purchasing process involves ordering and arranging payments. The difference between procurement and purchasing lay in that the latter is a subset of the former. Purchasing specialists are in charge of the business’ expenditure, while procurement managers are in charge of the business’ needs.

The steps in the purchasing process include:

  • Acknowledging purchase order.

  • Send a shipping notice.

  • File receipts.

  • Invoicing.

  • Perform a three-way match. 

  • Arrange payment.

Although they are similar, procurement and purchasing have different end goals, and they focus on other areas of the procurement process. Procurement and purchasing are crucial to all businesses, and the procurement cycle includes payment, combining the two. 

How procurement can enable innovation?

A project manager is always looking for a new procurement strategy to cut costs. Far from simply sourcing and receiving goods, procurement specialists drive innovation and progression.

Procurement is constantly adapted and evolving to suit the needs of the company. A good procurement specialist finds new ways of procurement purchasing to lower costs and improve efficiency. So, how can procurement enable innovation?

Relationships with suppliers can allow the business to grow in new ways. A good relationship might give you exclusive rights to the supplies and better-negotiated contracts. Suppliers and procurement teams influence each other and are excellent to improve supply chain efficiency and sustainability. 

Using procurement software is a great way to create new processes and strategies. Electronic procurement improves the overall efficiency as there is no manual time wasted authorizing each purchase. 

The best procurement specialists are highly creative in innovating new methods. 

If you automate your procurement, the software analyzes the best prices and time frames. You also free up time and workforce to focus your efforts in other areas. 

Procurement can also drive innovation in sustainability. As the world fights to find the most sustainable practices, procurement teams are at the forefront of improving economic strategies — a collaboration between companies and reducing waste all work to lower energy and costs. 

What does RFI mean in procurement?

The procurement process can be highly complex as companies try to simplify and rationalize each purchase. Some steps help the company make strategic procurement decisions. 

RFI stands for the request for information, and this is one of the lowest cost methods of vetting a potential vendor. Businesses can ask vendors to provide information about the purchase. 

The request for proposal (RFP) is a document outlining the procurement proposal by an interested company, often through bidding. The request for quotation (RFQ) is a purchase request requiring the supplier to share quotes and qualifications of the transaction. 

Purchasing and supply teams use RFI, RFP, and RFQs to streamline the procurement process. 

What is a procurement specialist?

A procurement professional oversees sourcing materials, collaborating and negotiating with vendors, and ordering supplies.

Procurement specialist duties include:

  • Contract management. 

  • Maintaining supplier relationships.

  • Acting as office manager, store manager, and inventory manager.

  • Contract negotiation.

  • Sourcing and potential vetting suppliers.

  • Overseeing procurement departments.

  • Functioning as a business analyst.

Chief procurement officers behave as operations managers and are in charge of the entire procurement process. Procurement specialists have to collaborate and liaise with other teams within the business.  

Procurement specialists need to understand the needs of the company in detail to conduct efficient and practical purchases. The job is usually reliable and secure. 

You have the chance to make great connections and network with suppliers and businesses outside of your company, which offers excellent career development prospects. 

You will get the chance to familiarize yourself with some of the world’s most innovative technology. Procurement departments utilize new technologies to streamline the process.

The job also offers the chance to travel. Some procurement departments have connections worldwide, and you might be required to travel abroad as part of the role. 

If you love the idea of jetting off and seeing the world, a procurement role could be for you. Procurement specialists also learn invaluable finance skills. You will be able to manage your money effectively yourself, and this is an irreplaceable life skill.

The Chartered Institute of Procurement and Supply (CIPS) offers members the network and resources to ensure procurement specialists meet sustainability goals. 

Procurement specialist job descriptions specify that previous experience or training in procurement and supply chains is necessary. There are online training courses that provide the support and teaching needed to understand procurement.

How much do procurement analysts make?

The Job site Indeed suggests that the average procurement specialist salary is $78,175 per year. 

A procurement officer often receives excellent benefits such as health insurance, dental insurance, and gym memberships.

Similar job titles, such as logicians or supply chain managers, can earn $76,270 annually. Procurement, purchasing, and supply chain management are lucrative careers with plenty of career development opportunities. 

What skills to become a procurement specialist?

Procurement specialist jobs require specific vital skills such as solid communication skills, soft skills, and interpersonal qualities are essential for any procurement specialist. 

You need to communicate objectives and processes to stakeholders, procurement teams, and purchasing teams. Any job description increasingly specifies the candidates must have soft skills

Soft skills are crucial for the smooth running of any operation and business administrator. The ability to influence and persuade are vital procurement specialist requirements. 

A procurement specialist encourages stakeholders and team members to follow their innovative strategies. It is a critical skill to ensure all business operations work towards the same goals.

Relationship management is essential for all procurement specialists. To ensure a smooth procurement and supply chain process, you need to keep sales representatives, stakeholders, and suppliers happy. Taking the time and effort to build trust and quality relationships marks a good procurement specialist.

Technical skills, such as understanding Microsoft office, Microsoft excel, and a supply management system, are beneficial. Procurement specialists spend a lot of time using innovative technology and computer systems. 

Essential technical ability will give you a competitive edge, while negotiation skills are also vital. Procurement teams negotiate contract agreements with suppliers and developing the skills to negotiate low prices, and practical terms are essential. 

An adaptable and flexible person makes a good procurement specialist. Supply chains and suppliers change all the time, and a procurement specialist needs to manage change and adapt the business’ strategies to take advantage of the fluctuations. 

Previous procurement experience will also help you find a job in procurement. Understanding market research, human resource management, and financial skills are all advantages. 

There are many online training courses to teach you the basics of procurement and purchasing. Procurement specialist jobs sometimes require qualifications and proven training, and online courses provide a thorough, practical way of learning the skills you need for your role as a procurement specialist. 

How can I become a procurement officer?

To become a procurement specialist, you need to understand the steps in the procurement process. You need to prove that you know what the business needs and when. 

Procurement and purchasing roles require talented individuals and strong leaders to implement an innovative corporate strategy to improve the business. 

You may want to gain experience in procurement or supply chain management departments. Internships or entry-level jobs will provide you with background knowledge and a basic understanding of how procurement works.

Procurement roles are excellent job opportunities for anyone who wants an exciting and varied role. Procurement specialists can prove themselves straight away as they hold worthwhile responsibilities. 

Some companies require candidates to have bachelor’s degrees in economics, finance, or business management. To become a certified procurement professional, sign up for an online training course. 

We offer a Purchasing and Procurement Basics Online Certification Course at Courses for Success that covers all procurement processes. This course teaches you procurement cycles, supply chains, managing competitive bids, and negotiating a contract.

You will receive a certificate on completion to share on your resume. The training program turns beginners into procurement experts. If you’re considering becoming a procurement officer, this course offers the resources and materials to get you there. 

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