Procurement is the process of acquiring goods, services, or works from an external source. It is a critical function in any organization, as it is essential to ensure that the right products or services are obtained at the best possible cost, quality, and terms.

Procurement Objectives

The objectives of procurement refer to the goals that organizations aim to achieve through their purchasing and sourcing activities. These objectives typically include:

  • Cost reduction: One of the primary objectives of procurement is to minimize costs by negotiating favorable terms with suppliers and finding more efficient procurement processes.
  • Quality improvement: Another objective of procurement is to ensure that the goods and services purchased meet or exceed the required standards of quality. This can involve working with suppliers to improve product design, testing and inspection, and other quality assurance measures.
  • Supplier management: Effective procurement also involves managing relationships with suppliers, including identifying potential suppliers, evaluating their capabilities, and monitoring their performance over time.
  • Risk management: Procurement activities should also be designed to minimize risk, such as by identifying potential supply chain disruptions, developing contingency plans, and diversifying suppliers.
  • Compliance: Organizations also aim to ensure that their procurement activities comply with relevant laws, regulations, and ethical standards, such as those related to labor practices, environmental sustainability, and anti-corruption.

By achieving these objectives, organizations can improve their overall efficiency, reduce costs, and mitigate risks, leading to a more sustainable and profitable business.

The Procurement process

Procurement processes vary depending on the organization and the specific requirements of the procurement. However, most procurement processes typically include the following key steps:

  • Need Identification: The first step in the procurement process is to identify the need for a product or service. This may involve determining the quantity and specifications of the product or service required, as well as identifying any specific requirements or constraints.
  • Development of a procurement strategy: Once the need has been identified, a procurement strategy should be developed. This may involve determining the best procurement method, identifying potential suppliers, and establishing evaluation criteria.
  • Conduct market research: Before issuing a request for proposal (RFP) or invitation to tender (ITT), it is important to conduct market research to identify potential suppliers and understand market trends and pricing.
  • Issue RFP/ITT: The next step is to issue an RFP( Request for proposal) or ITT to potential suppliers. This should include clear specifications and evaluation criteria to ensure a fair and transparent bidding process.
  • Evaluate proposals: Once proposals have been received, they should be evaluated based on the established criteria. This may involve a scoring system or other objective evaluation methods.
  • Negotiate and award contract: Once a preferred supplier has been identified, negotiations may take place to finalize the terms and conditions of the contract. The contract is then awarded to the successful supplier. If the aim of the RFP is to prequalify suppliers, a list of pre-qualified suppliers would then be developed.
  • Contract management: Once the contract has been awarded, it is important to manage the supplier relationship to ensure that the terms of the contract are met and that the supplier delivers the required products or services on time and to the required quality standards.
  • Performance evaluation: After the contract has been completed, it is important to evaluate supplier performance to identify any areas for improvement and ensure that future procurement processes benefit from lessons learned.


There are different procurement methods, including open tendering, selective tendering, and direct procurement.

  1. Open Tendering: This method involves advertising the procurement opportunity publicly, and inviting all interested and qualified suppliers to submit bids, quotations, or proposals. Open tendering is typically used for procurements with a high value or where there are many potential suppliers.
  2. Restricted Tendering: In this method, the organization invites only a select group of pre-qualified suppliers to submit bids,quotations or proposals. Restricted tendering is typically used for procurements where there are a limited number of potential suppliers or where the organization has worked with certain suppliers before and wants to maintain existing relationships.
  3. Direct Procurement: This method involves directly negotiating with a supplier without a formal competitive process. Direct procurement is typically used for procurements where there is only one potential supplier or where the value is low. The value at which a company is allowed to use a direct procurement process is usually determined by the Procurement Policy.

Organizations can also use a combination of these methods or other specialized procurement methods, depending on their specific needs and the requirements of the procurement. It is important to choose the right procurement method based on factors such as the value, complexity, and risk of the procurement, as well as any regulatory requirements or organizational policies that may apply.

Important definitions.

  1. Request for Proposals (RFP): An RFP is a document that sets out the requirements for procurement and asks potential suppliers to submit proposals that describe how they would meet those requirements. RFPs are typically used for complex or specialized procurements where there may be several ways to meet the requirements.
  2. Request for Quotations (RFQ): An RFQ is a simpler document than an RFP, which typically asks suppliers to provide a price for a specific product or service. RFQs are typically used for procurements with a lower value or where the requirements are well-defined.


Effective procurement requires good planning, communication, and collaboration with stakeholders, including end-users, suppliers, and internal departments such as finance and legal. The goal is to obtain the best value for money while ensuring compliance with organizational policies and regulatory requirements. Effective procurement is essential to ensure that organizations obtain goods, services, or works from external suppliers in a timely and cost-effective manner. Some qualities of effective procurement include:

  1. Strategic Thinking: Effective procurement requires a strategic approach that aligns procurement goals and objectives with the overall goals of the organization. This involves understanding the organization's needs, identifying opportunities for cost savings and value creation, and developing long-term relationships with suppliers.
  2. Strong Communication Skills: Effective procurement professionals must have excellent communication skills to build relationships with suppliers, negotiate contracts, and work collaboratively with internal stakeholders, such as finance and legal departments.
  3. Knowledge of Market and Industry Trends: Procurement professionals should have a good understanding of market and industry trends, as well as the products, services, or works being procured. This knowledge helps them identify potential suppliers, evaluate bids and proposals, and negotiate favourable terms.
  4. Analytical Skills: Effective procurement professionals must have strong analytical skills to evaluate supplier bids, analyse data and market trends, and make informed decisions that deliver value to the organization.
  5. Attention to Detail: Procurement requires a high level of attention to detail to ensure that contracts are accurate, suppliers meet their obligations, and goods or services are delivered on time and to the required quality standards.
  6. Ethical and Professional Conduct: Effective procurement professionals must adhere to ethical and professional standards in their dealings with suppliers and internal stakeholders. This includes ensuring transparency and fairness in the procurement process and avoiding conflicts of interest.
  7. Continuous Improvement: Effective procurement professionals are committed to continuous improvement, regularly reviewing and updating procurement processes, policies, and procedures to ensure they remain relevant and effective.

By possessing these qualities, procurement professionals can help organizations achieve their procurement objectives and deliver value to the organization through cost savings, increased efficiency, and improved supplier relationships.

Procurement challenges

  • Supply chain disruptions: Supply chain disruptions such as natural disasters, political instability, or supplier bankruptcy can impact procurement. These disruptions can lead to delayed deliveries, increased costs, or quality issues.
  • Managing supplier relationships: Building and maintaining good relationships with suppliers is essential in procurement. However, it can be challenging to manage numerous suppliers, negotiate contracts, and ensure compliance with supplier agreements.
  • Price fluctuations: Prices of goods and services can fluctuate based on market conditions, which can make it challenging to forecast procurement costs accurately.
  • Data management: Procurement generates vast amounts of data, which can be challenging to manage and analyze. Procurement professionals must effectively collect, store, and analyze data to make informed decisions.
  • Compliance and regulation: Procurement must comply with various legal and regulatory requirements, such as ethical sourcing, environmental sustainability, and fair labor practices. These requirements can be complex and challenging to navigate.
  • Talent management: Procurement requires skilled professionals who can negotiate contracts, manage supplier relationships, and analyze data. However, finding and retaining talent in procurement can be challenging, particularly in competitive job markets.

Overall, effective procurement requires careful planning, coordination, and execution. By addressing these challenges, organizations can improve their procurement processes and reduce costs while enhancing their ability to deliver value to customers.

Importance of Procurement

Procurement is an essential function in any organization, and its importance can be summarized as follows:

  • Cost savings: Procurement plays a critical role in reducing costs for an organization. By negotiating better prices and terms with suppliers, organizations can improve their bottom line and increase their profitability.
  • Quality control: Procurement ensures that the goods and services purchased meet or exceed the required standards of quality, which is critical to the success of the organization. Poor quality products can lead to costly rework, delays, and damage to the organization's reputation.
  • Supply chain management: Procurement is also responsible for managing the organization's supply chain. This involves identifying and assessing potential suppliers, developing relationships with them, and monitoring their performance to ensure that they meet the organization's requirements.
  • Risk management: Procurement helps to mitigate risks associated with the supply chain. By diversifying suppliers, developing contingency plans, and monitoring supply chain disruptions, procurement can reduce the impact of unexpected events on the organization.
  • Innovation: Procurement can drive innovation within an organization by working with suppliers to develop new products or improve existing ones. This can give the organization a competitive edge and lead to increased market share.

Procurement is also increasingly becoming more strategic, with organizations focusing on building long-term relationships with key suppliers, developing sustainable procurement practices, and leveraging technology and data analytics to optimize procurement outcomes.