Procurement

What is procurement?

Procurement is a multifaceted concept central to the functioning of businesses, organizations, and governments.

Procurement is operationally cross-functional and includes the processes of acquiring goods, services, and works from external sources that an organization needs to operate and produce its goods and services.

Procurement is both transactional and strategic. Done professionally, it is planned to meet organizational objectives like cost reduction, quality enhancement, risk mitigation, and sustainability. The vendors and suppliers that organizations rely on are often considered strategic partners.

What is included in procurement?

The scope of procurement is broad and varied. It spans many industries, including manufacturing, healthcare, construction, government contracting, and beyond.

Procurement could involve the purchase of a wide range of goods and services, from raw materials and components to finished products, equipment, consultancy services, and even intellectual property rights.

In essence, the procurement function includes everything from sourcing suppliers and negotiating contracts to managing supplier relationships, monitoring performance, ensuring compliance with regulations and ethical standards, creating purchase orders, processing invoices, and making payments to vendors.

What are the goals of procurement?

At the heart of procurement lies the fundamental goal of obtaining the right goods and services, of the right quality, at the right time, and at the right price.

But, achieving this goal can be a complex operation that requires a systematic approach, including strategic planning, market analysis, supplier selection, contract negotiation, ongoing vendor management, accounts payable, and accounting.

Cost control is an obvious central goal of procurement. But, effective procurement practices drive operational efficiency and cost savings and can contribute to innovation, competitive advantage, and organizational resilience.

By engaging with suppliers as partners, procurement professionals can tap into their expertise and insider knowledge. Plus, procurement teams can identify new opportunities and source cutting-edge products and services by staying on top of market trends, emerging technologies, and industry developments.

Ultimately, organizations can leverage procurement as a catalyst for innovation, growth, and sustainable competitive advantage by aligning procurement strategies with broader business objectives.

Strategic sourcing and procurement.

One of the key principles underpinning modern procurement is strategic sourcing.

Strategic sourcing involves analyzing an organization’s procurement needs, identifying suitable suppliers, and developing long-term partnerships with them.

Procurement workflows.

Modern procurement encompasses a set of processes that typically follow a structured workflow.

These processes may include:

• Demand forecasting.
• Requisitioning.
• Supplier selection.
• Contract negotiation.
• Purchase order processing.
• Goods receipt and inspection.
• Invoice verification.
• Payment processing.

The evolution of procurement.

In recent years, the procurement function has evolved significantly due to technological advancements, globalization, regulatory changes, and shifting market dynamics. Events like the COVID-19 pandemic created an increased awareness of the importance of procurement.

Advances in digital technologies, such as e-procurement platforms, supply chain management systems, and advanced spend analytics, have transformed traditional procurement practices by streamlining processes, enhancing visibility and control, and facilitating data-driven decision-making.

ESG and procurement.

Sustainability and social responsibility have emerged as important considerations in modern procurement practices.

Organizations are increasingly adopting environmentally friendly and ethically responsible procurement policies to minimize their ecological footprint, promote fair labor practices, and uphold ethical standards across their supply chains.

Sustainable procurement initiatives encompass strategies such as green procurement, social procurement, and ethical sourcing, which aim to balance environmental, social, and governance objectives.

In the context of public procurement, governments play a central role in regulating procurement activities to ensure transparency, fairness, and accountability.

How Airbase helps with procurement.

Airbase’s procure-to-pay platform revolutionizes procurement by streamlining and automating every stage of the procurement lifecycle.

Through its intuitive interface, automated accounting, and robust features, Airbase empowers finance and procurement teams to gain control and visibility over spending, while also enhancing collaboration and compliance.

With Airbase, users can easily manage vendor relationships, track purchase orders, and streamline approvals, all on a centralized platform that integrates seamlessly with existing accounting systems.

By automating manual tasks such as invoice processing and expense management, Airbase enables organizations to eliminate inefficiencies, reduce errors, and accelerate the procurement process, ultimately saving time and resources.

Powerful analytics give real-time insight into spending patterns and supplier performance, which in turn supports informed decision-making.