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2.2.1 Procurement

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2.2.1 Procurement

Procurement is the business function that concerns the research and preparation necessary before making a purchase. This guides the purchasing process and is required in all subsequent engagements involved in resource acquisition. Procurement involves the nitty-gritty details necessary in resource acquisition and includes setting up contracts and having the authority to engage with the necessary suppliers. Key aspects of procurement include:

  • Category management

This aspect of procurement looks into what you are going to source and what different kinds of resources you require.

  • These kinds of resources include:
    • Direct resources – all materials involved in the creation of your finished product
    • Indirect resources and services – all resources and services necessary for getting your finished product to the market
    • IT services – the systems and software necessary in the creation and distribution of your product
  • Sourcing

This aspect of procurement is concerned about setting up supply, specifically locating and determining places for acquiring your resource requirements. Most importantly, the main concern of this aspect of procurement is finding the best quality of supplies for the least amount of money so as to maximise and efficiently utilise your funds.

  • Supplier relationship management

This is the human side of procurement that deals with and engages with people, specifically suppliers who are necessary for the procurement process. This aspect is concerned with maintaining and improving relations with suppliers to ensure that your organisation can consistently and continuously get the best value for its money.

Procurement Process

Like most other processes, there is no one set or fixed process for procurement. However, each procurement procedure has commonalities and key steps that are typically followed. These are fundamental to the process and are likewise essential to note in your operational plan. A typical procurement process would involve the steps outlined in the figure below.

Steps in the Procurement Process

Generally speaking, the procurement process is relatively straightforward. It involves good planning, research, as well as human relations and negotiation skills. However, it is important to note that in the process outlined above, the actual negotiation and purchase of the goods or services are steps linked to purchasing, a function discussed next.