What is procurement?

Procurement is the strategic process of sourcing and acquiring the goods and services that organisations need to operate effectively. As a vital component of supply chain management, it involves identifying suitable suppliers, negotiating contracts, and ensuring timely delivery of quality products at competitive prices.

Simply put, procurement is how businesses buy what they need to function. Whilst the term applies to any purchasing activity, it's most commonly used in business contexts where organisations require goods or services on a significant scale.

Why procurement matters

Effective procurement directly impacts a company's bottom line and operational efficiency. By establishing relationships with reliable suppliers who offer competitive pricing and quality products, organisations can:

Reduce costs and improve profit margins
Minimise supply chain risks through diversified supplier networks
Ensure quality standards are consistently met
Streamline operations and reduce administrative burden

Since procurement costs often represent a substantial portion of total expenditure, even small improvements in the process can yield significant savings.

The procurement process

Whilst specific procedures vary between organisations, most procurement processes follow these key stages:

Needs identification – Departments identify and justify their purchasing requirements
Purchase requisition – Formal requests are submitted for approval by the procurement team
Supplier research – Potential suppliers are identified and evaluated based on criteria such as price, quality, and reliability
Request for proposals – Detailed specifications are sent to shortlisted suppliers to obtain competitive quotes
Contract negotiation – Terms, pricing, and delivery schedules are agreed and documented
Purchase order – Official orders are placed with selected suppliers, specifying exact requirements
Delivery and inspection – Goods are received, checked against specifications, and quality-tested
Invoice processing – Three-way matching of purchase orders, delivery receipts, and invoices ensures accuracy
Payment authorisation – Approved invoices are processed for payment
Supplier relationship management – Ongoing performance monitoring and relationship building with key suppliers

Procurement teams and roles

The structure of procurement functions varies significantly by organisation size:

Small businesses typically handle procurement through their finance teams, with basic purchasing processes managed by office managers or financial controllers.

Large enterprises often maintain dedicated procurement departments led by specialist roles:

Procurement managers oversee day-to-day purchasing activities, supplier negotiations, and contract management
Category managers specialise in specific product or service categories
Chief procurement officers (CPOs) provide strategic leadership, reporting to the board and working closely with CFOs

CPOs focus on strategic sourcing, cost optimisation, risk management, and aligning procurement activities with broader business objectives.

Digital procurement

Digital procurement (also known as e-procurement) transforms traditional purchasing through technology, offering substantial benefits:

Key advantages:

Automated workflows reduce manual processing and human error
Enhanced transparency provides better spending visibility and control
Faster processing accelerates approval cycles and order fulfilment
Cost savings through improved negotiation and reduced administrative overhead
Better compliance with standardised processes and audit trails

Modern procurement platforms integrate with existing enterprise systems, enabling seamless data flow and real-time reporting. Advanced solutions incorporate artificial intelligence and machine learning to optimise supplier selection, predict demand, and identify cost-saving opportunities.

Implementation benefits:

Streamlined supplier communications
Automated invoice processing
Centralised contract management
Real-time spend analytics
Mobile accessibility for approvals

The future of procurement

As businesses increasingly recognise procurement's strategic value, the function continues to evolve beyond basic purchasing towards value creation, risk management, and sustainable sourcing practices.

Modern procurement teams leverage technology to focus on strategic activities whilst automation handles routine tasks, ultimately delivering greater value to their organisations through improved efficiency, cost control, and supplier relationships.

Ready to modernise your procurement process? Explore how Spendesk can help streamline your purchasing workflows with automated approvals, real-time visibility, and integrated expense management.

FAQs

Procurement is a strategic process that includes supplier research, contract negotiation, and relationship management. Purchasing is simply the act of buying goods or services. Procurement encompasses the entire supply chain strategy, whilst purchasing focuses on individual transactions.

The timeline varies significantly depending on complexity and value. Simple purchases might take days or weeks, whilst complex procurements involving RFPs and contract negotiations can take several months. Digital procurement tools can significantly reduce these timescales.

Whilst small businesses may not need complex procurement departments, having basic processes for supplier evaluation, approval workflows, and record-keeping can reduce costs and risks. Even simple procurement practices can improve efficiency and compliance.

Digital procurement reduces manual errors, speeds up approval processes, provides better spending visibility, and enables automated invoice processing. It also improves compliance through standardised workflows and creates audit trails for better financial control.

Companies typically benefit from dedicated procurement resources when their annual purchasing exceeds £1 million, they have complex supplier relationships, or they spend significant time on purchasing activities. The cost savings from professional procurement management often justify the investment.