What is procurement and is it something for my company?

Procurement is a term you probably hear more often nowadays. It is a term that is sometimes confused with purchasing, but this does not include the whole concept. In this article we explain what procurement is, what it is used for and hopefully give you a better insight into its applicability for your company.

What does procurement mean?

We can best describe procurement as activities that are aimed at controlling and directing the incoming flow of goods from a company until the moment these goods go into production. As we wrote before, procurement is more than just purchasing. It also includes inventory management, material requirements planning and transportation.

Pay only

An example of a procurement used for purchase order payment options is pay only. This is used when your company places a purchase order with a supplier. The supplier therefore becomes the invoice creditor. The intermediary who takes care of the procurement solution then receives, checks, scans, books and pays this invoice. This ensures that you are relieved of all the work involved in paying the invoices.

Procure–to–pay

In addition to pay only, there is also an option for procure-to-pay. This includes just a little more than the pay only option. It means that the company that is between the two parties not only pays for the purchase order, but also places it. The company then monitors the order until delivery.

Source–to–pay

A third solution for payment options in the purchasing process is source-to–pay. First, an analysis of the market is made. A supplier is then selected that best matches the wishes and commercial conditions of your company.

The importance of procurement for your business

There are different gradations in which a solution for the payments can take place. It is important to consider how a solution like this could benefit your company. Thinking about your purchasing policy at a strategic level ensures that people actually think about purchasing products instead of just buying them based on a gut feeling. In addition to these types of procurement, there is for example also e-procurement and indirect procurement.