What is Procurement?
Procurement is a technique and structured method used to streamline an organization’s procurement process and achieve desired results while saving cost, reducing time, and building win-win supplier relationships. Procurement types can be direct, indirect, reactive, or proactive in nature.
What’s the difference between indirect, direct, and services procurement?
Direct, indirect, and services procurement are subsidiaries of the overarching procurement process and differ in definition, assignments, and more. By taking a deeper look at the difference between these processes and understanding what they comprise, stakeholders will have an easier time taking appropriate measures to fulfill their needs.
Direct Procurement | Indirect Procurement | Services Procurement |
---|---|---|
Acquisition of goods, materials, and/or services for manufacturing purposes | Sourcing and purchasing materials, goods, or services for internal use | Procuring and managing the contingent workforce and consulting services |
Ex: Raw materials, machinery, and resale items | Ex: Utilities, facility management, and travel | Ex: Professional services, software subscriptions, etc. |
Drives external profit and continuous growth in revenue | Takes care of day-to-day operations | Used to plug process and people gaps |
Comprises of stock materials or parts for production | Used to buy consumables and perishables | Used to purchase external services and staff |
Establish long-term, collaborative supplier relationships | Resort to a short-term, transactional relationship with suppliers | Maintain one-off, contractual relationships with suppliers |
What is a Procurement Process?
The procurement process is a structured method of procuring goods and services needed for an organization. This process saves cost, reduces time, and builds win-win supplier relationships.
The procurement process is the series of processes that are essential to get products or services from requisition to purchase order and invoice approval. Although we use procurement and purchasing interchangeably, they differ slightly.
While purchasing is the overarching process of obtaining necessary goods and services on behalf of an organization, procurement describes the activities involved in getting process comprises the steps that must be followed while reviewing, ordering, obtaining, and paying for goods/services them. The procurement process in an organization is unique to its context and operations.
Regardless of the uniqueness, every procurement management process consists of 3 Ps’, namely Process, People, and Paperwork.

1. Process
Process comprises the steps that must be followed while reviewing, ordering, obtaining, and paying for goods/services.
2. People
These are stakeholders, and their specific responsibility in the procurement cycle is to initiate or authorize every stage of the process. The number of stakeholders involved is directly proportional to the risk and value of the purchase.
3. Paper
This is the paperwork and documentation involved in every stage of the procurement process – all of which are collected and stored for reference and auditing reasons.