What is Procurement Support and Why it Matters 2025?

Procurement might seem like just another part of everyday business operations, but it’s actually the heartbeat of a company, keeping everything from production to services running smoothly.

Traditionally, it wasn’t seen as particularly glamorous or strategic—just a necessary function to make sure materials and supplies were on hand when needed. But that’s all changing. Today, procurement stands at the center of a storm, driven by rising costs, supply shortages, and global market pressures.

Gone are the days when chief procurement officers (CPOs) were tucked away in the back office, focused solely on compliance and cost reduction. Now, they’re front and center, innovating with data analytics and new technologies to make procurement faster and more efficient.

Modern procurement tools are transforming the landscape overnight. Automating the procurement process doesn’t just mean catching up; it means staying ahead, taking advantage of early purchase discounts, and turning sluggish, manual processes into a sleek, strategic operation.

If you’re still relying on ancient tools, this blog is your wake-up call. Let’s explore the nuts and bolts of the procurement process and give the upgrade it deserves.

Understanding Procurement Support

Procurement is simply the process where businesses find and buy the goods, services, or materials they need from suppliers. This includes all the steps needed to source, request, approve, and track each purchase, helping businesses keep an eye on their spending.

No business, big or small, can do everything on its own. Whether it’s to keep the lights on or to make products, they all need to buy goods and services from outside suppliers.

But procurement is about more than just sticking to a budget. It’s about making sure every purchase brings enough value to the company. It’s a bit like how we shop for ourselves, weighing things like quality, delivery time, and value for money. For businesses and organizations, though, the process is much more complex.

What Does Procurement Involve?

Procurement goes beyond just getting the best bang for your buck. It includes a series of steps to ensure a business has what it needs, when it needs it, and at the right price:

Assessing what the business needs based on current stock levels and what the market is looking for.
Planning budgets and inventory well ahead of time to avoid surprises.
Doing homework on potential suppliers to find the best fit.
Negotiating deals and bidding competitively to land favorable terms.
Managing relationships with suppliers to keep everything running smoothly.
Checking the quality of all goods and services received to ensure they meet standards.
Keeping critical materials or services stocked to prevent any operational hiccups.
Keeping detailed records of purchases and monitoring how well the procurement process is working.

In the case of direct procurement, which is a key part of supply chain management, this involves a structured approach. A procurement officer must coordinate all these activities to make sure the business gets the necessary goods and services, aligning with the company’s broader objectives.

How Procurement Support Integrates with Corporate Strategy?

Procurement isn’t just for the finance folks; it’s vital for the whole business. It affects everything from your profit margins to your company’s entire strategy. Here’s how:

Corporate Identity: What your company stands for should be evident in what you buy. For example, if you’re all about being green, your suppliers should be too.
Market Position: The choices you make in procurement should appeal to your target market. The right suppliers can help you meet your customers’ expectations.
Human Resources: Who handles your procurement matters. Whether it’s a seasoned pro or someone else on the team, their approach can make a big difference.

That’s why setting up a solid procurement department takes a lot of effort and planning. This team does more than just purchase goods; they help shape the business itself.

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Direct, Indirect, Goods and Services Procurement: The Difference

PROCUREMENT TYPE	DEFINITION	EXAMPLE
Direct Procurement	Involves purchasing goods and services that directly contribute to producing an end product.	Raw materials, components and parts, machinery, items purchased for resale
Indirect Procurement	Consists of acquiring goods and services not directly used in production, supporting operational functions.	Office supplies, marketing services, utilities
Goods Procurement	Concerns the acquisition of physical items, which can be for direct production or operational support.	Raw materials, wholesale items, office supplies
Services Procurement	Encompasses the procurement of people-based services, either directly related to production or for supporting operations.	Law firms, contractors, contingent labor, on-site security services

What Makes Up the Procurement Support Process?

Procurement is a step-by-step process that varies from business to business, involving everything from creating a requisition to placing a purchase order and approving an invoice. But despite these differences, three key elements are always at play:

Procedure: Every company needs to clearly outline the steps for reviewing, accepting, and receiving orders. When this process is organized, it prevents mistakes and inefficiencies that can lead to delays and missed payments.
Administration: It’s important to know who’s involved in the procurement process and what their roles are. As the stakes of a purchase increase, so does the number of people involved. Making sure everyone knows their part and performs it correctly keeps things running smoothly.
Documentation: Keeping good records is just part of procurement. Effective documentation makes it easier for everyone later on, whether it’s for pulling up past information or for auditing purposes.

When you map out these steps in a clear flowchart, it not only makes the procurement process transparent and fair, it also shows where there might be room for improvement.

Key Steps in Procurement Support

Procurement can seem like a complex process, but it really boils down to a few key steps that fit each company’s needs. Here’s a straightforward look at how it works:

Figure Out What You Need: Start by identifying exactly what goods or services your business needs, whether it’s something totally new, a regular restock, or a renewal of services. It’s a good idea to chat with different departments to nail down the exact specs—like the type of materials or technical details.
Put in a Request: If you need a bunch of new supplies or services, fill out a purchase request. This should spell out all the details like how much, how soon, and at what cost, and then get it approved by whoever’s in charge.
Pick Your Supplier: With your approved request in hand, it’s time to shop around for the best vendor. Send out a detailed request for quotes to potential suppliers to see who offers the best deal, not just in price but also in quality and reliability.
Negotiate the Deal: Try to get at least three quotes to compare and negotiate the best terms. Make sure you have alternatives in case things don’t work out, and get everything agreed upon in writing.
Place the Order: Once you’ve picked a supplier, send them a purchase order that lays out exactly what you need so there are no mix-ups.
Check the Delivery: When your order arrives, check it over carefully to make sure everything is correct and meets your standards.
Match It Up: Your accounts payable team should make sure the numbers on the purchase order, the delivery receipt, and the invoice all match. This helps avoid paying for things you didn’t get or that weren’t right.
Pay the Bill: If everything checks out, approve the invoice for payment. Keeping a regular payment schedule helps avoid late fees and keeps your suppliers happy.
Keep Records: Keep track of everything from your initial request to the final invoice. Good records can help you reorder, handle audits, sort out taxes, and deal with any disputes that come up.

3 Stages of Procurement Support

Procurement breaks down into three main phases: sourcing, purchasing, and payment.

1) Sourcing

This is where it all starts. The company figures out what it needs, sends out a purchase request, and picks the best suppliers. It’s also when you start building good relationships with those suppliers, which can help improve the products and trust between both parties.

2) Purchasing

During this phase, you’re making deals, placing orders, and then checking the goods or services when they arrive to make sure everything’s as expected.

3) Payment

This is the final stretch. The accounts payable team checks that the order, delivery, and invoice match up. If they do, they give the green light to pay the invoice. It’s also important to keep all the paperwork in order, just in case you need to look something up later.

What is Procurement Life Cycle Management?

Companies often view the procurement process as a continuous cycle. This approach highlights how the different tasks and stages overlap and depend on each other. It’s a cycle that keeps going, always linking back into the business’s broader operations, like adhering to company rules and budgeting procedures.

This lifecycle isn’t always a straight line. It needs to be flexible to handle a constantly changing digital supply chain, where suppliers, availability, and costs can shift unexpectedly. Making adjustments along the way is key to keeping everything running smoothly.

The 3Ps of Procurement

Procurement revolves around three essential elements: people, processes, and paperwork.

1) People: It all starts with the team. This includes everyone from procurement specialists to accounts payable and the departments that need the purchases. The more crucial or costly the purchase, the more people you’ll find involved, making decisions and giving approvals.

2) Process: A smooth procurement process keeps costs down and ensures that everything the business needs arrives on time. Everyone involved needs a clear understanding of their roles and deadlines to keep things running smoothly. Without a clear process, you’re likely to run into costly mistakes like overpaying or delaying payments, which can strain relationships with suppliers.

3) Paperwork: Good record-keeping is essential. These records help keep track of everything from how much you’re paying to how suppliers perform, making sure the procurement engine runs smoothly, no matter who’s at the wheel. They also come in handy during audits or disputes, providing a clear trail of all transactions.

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Top 7 Procurement KPIs to Track

Keeping an eye on procurement KPIs helps businesses streamline their procurement process, track progress towards goals, and pinpoint areas that need improvement. Here’s a look at some key procurement KPIs commonly tracked:

Purchase Order Cycle Time: This tracks how long it takes from making a requisition to sending out a purchase order to suppliers. It’s calculated by dividing the total processing time by the number of purchase orders sent.
Supplier Lead Time: This measures the average time it takes suppliers to deliver items once they receive a purchase order. It’s found by dividing the total days taken by the number of orders.
Number of Suppliers: Monitoring how many suppliers you have helps manage diversity and administrative overhead. Procurement teams often review and streamline their supplier list to keep operations efficient.
Supplier Defect Rate: A critical indicator of supplier quality, this is calculated by dividing the number of defective parts received by the total parts supplied by a vendor.
Supplier Availability: This KPI assesses a supplier’s ability to meet urgent or last-minute demands, calculated by dividing the number of successfully fulfilled orders by the total orders placed.
Fulfillment Accuracy: This gauges how often suppliers correctly fill orders as per the purchase order. It’s calculated by dividing the number of accurately filled orders by the total orders.
Total ROI of Procurement Process: This measures the overall effectiveness of your procurement strategy by comparing the annual savings generated by procurement activities to the total spent on procurement annually.

What’s the Bottom Line?

Now that you understand the basics of procurement support, including its various types, how it fits into a company’s workflow, and top KPIs to track, you’re well on your way to smoother buying processes.

By focusing on procurement process optimization which includes improving performance, speeding up approvals, and keeping a close eye on spending, you’ll notice better product quality, higher customer satisfaction, and budgets that actually stick.

Here at QX Global Group, we get the challenges you face with procurement. That’s why our tailored procurement outsourcing solutions are all about making your processes more efficient and effective, so you’re always one step ahead.

Take a moment to think about your current procurement strategies. Are they doing everything they could be? Check out how our solutions at QX could help enhance your operations and lead to better outcomes.

Originally published Nov 28, 2024 12:11:45, updated Nov 29 2024

Topics: Finance and Accounting Transformation, Procure-to-pay cycle