Understanding the Procurement Process: A Complete Guide 

Procurement is a vital business function that directly impacts a company’s supply chain, business growth, and long-term success. The procurement process involves a series of steps to source, negotiate, and acquire goods or services that a business needs to meet its objectives. Procurement teams must ensure that every purchasing decision aligns with the company structure, business practices, and overall business strategy, while maintaining strong supplier relationships and achieving timely delivery. 

Today, procurement leaders are leveraging advanced procurement software like RohanProcure by Rohirrim to optimize procurement activities and drive greater efficiency. Whether you are dealing with direct procurement, indirect procurement, or services procurement, an effective procurement process is essential for reducing human error, improving inventory management, and meeting business requirements efficiently. 

What is Procurement? 

Procurement is the comprehensive process of identifying business needs, sourcing potential suppliers, negotiating contracts, and ensuring delivery time and product quality. The procurement department typically works closely with finance teams, department heads, and business stakeholders to align procurement strategies with broader business objectives. 

Procurement specialists oversee day-to-day operations, maintain strong relationships with suppliers, ensure timely delivery of products and services, and manage payment processing and approval. With tools like RohanProcure, companies can centralize procurement activities, monitor supplier performance, and optimize the entire procurement cycle from start to finish. 

Types of Procurement 

Understanding the different types of procurement is critical for optimizing procurement practices. The two primary categories are goods procurement and services procurement. Goods procurement involves tangible products such as raw materials, software subscriptions, and inventory supplies, while services procurement focuses on acquiring outsourced services, professional consulting, and maintenance support. 

An efficient procurement process requires adapting to both types, using clear procurement strategies, and selecting the proper procurement method depending on the business model, supplier availability, and competitive bidding opportunities. 

Direct vs. Indirect Procurement 

Direct procurement is directly tied to the production process: acquiring materials that form the foundation of a company’s products. Indirect procurement, on the other hand, involves purchasing goods and services necessary for day-to-day operations but not directly involved in the final product, such as office supplies, software subscriptions, and marketing services. 

Procurement managers must navigate the difference between purchasing for direct costs and securing reliable suppliers for indirect needs. Solutions like RohanProcure empower procurement teams to streamline direct and indirect procurement activities with greater visibility and control. 

Goods vs. Services Procurement 

Goods procurement emphasizes tangible products requiring careful attention to prices, delivery schedules, and product quality. Services procurement involves managing contract terms, service levels, and relationships with service providers to ensure business continuity. 

Both forms of procurement benefit from tools that support electronic procurement, competitive bidding, contract management, and real-time monitoring — all capabilities offered through RohanProcure’s innovative platform. 

What’s the Difference Between Indirect, Direct, and Services Procurement? 

While direct procurement focuses on raw materials and manufacturing, indirect procurement supports internal operations, and services procurement deals with outsourcing specialized skills or expertise. Understanding the nuances between these procurement types is a crucial step toward building a comprehensive procurement strategy. 

The RohanProcure tool is designed to handle all procurement processes, ensuring procurement professionals and departments maintain strong business relationships with preferred suppliers and achieve their procurement KPIs. 

What is a Procurement Process? 

The procurement process is a structured series of steps businesses follow to fulfill their purchasing needs. It includes everything from needs recognition to invoice processing and contract renewals. A vital business function, procurement ensures that business units have the necessary supplies to function efficiently while supporting strategic initiatives and minimizing direct costs. 

Steps involved in a Procurement Process 

An effective procurement process follows a systematic procurement lifecycle, which can be optimized using solutions like RohanProcure. 

Step 1: Needs Recognition 

Procurement begins when a business unit identifies a requirement. Procurement teams must assess business requirements and collaborate with department heads to start the procurement cycle efficiently. 

Step 2: Purchase Requisition 

A formal purchase request is created and submitted for approval. This document ensures that the procurement department knows what needs to be sourced, preventing miscommunication. 

Step 3: Requisition Review 

The finance department and procurement specialists review the purchase requisition for budget compliance, strategic alignment, and vendor feasibility. 

Step 4: Solicitation Process 

Procurement leaders solicit quotes from suppliers through a request for proposal (RFP), request for quotation (RFQ), or request for quote (RFQ) process, encouraging competitive bidding to secure the best terms. 

Step 5: Evaluation and Contract 

Procurement managers evaluate potential suppliers based on pricing, supplier performance, delivery terms, product quality, and supplier relationship potential before negotiating contract terms and finalizing the supplier agreement. 

Step 6: Order Management 

Orders are placed, delivery schedules confirmed, and procurement professionals oversee supplier management to ensure timely delivery. 

Step 7: Invoice Approvals and Disputes 

The finance team manages invoice processing, including approval of payment and resolving disputes, ensuring payment discounts and smooth payment terms. 

Step 8: Record Keeping 

Accurate record-keeping of procurement activities is crucial for tracking contract performance, ensuring compliance, supporting future procurement decisions, and maintaining accountability. 

Optimize your Procurement Process 

A streamlined procurement process improves the efficiency of your department and the overall organization. Here’s how you can help with optimizing the process: 

Streamline Processes with Automation 

Automating procurement processes using RohanProcure reduces human error, speeds up daily operations, and ensures that procurement specialists can focus on strategic tasks rather than administrative work. 

Centralize Procurement Activities 

With centralized data management, businesses can unify procurement activities, improve supply chain management, and drive efficiency across the procurement function. 

Conduct Spend Analysis 

Spend analysis provides visibility into purchasing patterns, supplier availability, and contract administration, allowing procurement teams to make better procurement decisions. 

Implement Strategic Sourcing 

Strategic sourcing with RohanProcure ensures business stakeholders engage with reliable suppliers and foster long-term relationships that improve contract renewals and supplier management. 

Establish Clear Procurement Policies and Guidelines 

Clear procurement policies set expectations around delivery terms, inventory control, approval processes, and procurement method use, fostering an efficient procurement process. 

Foster Stakeholder Collaboration 

Effective procurement practice requires collaboration between procurement teams, business units, and finance teams to align procurement activities with business objectives. 

Monitor Supplier Performance 

Regularly monitoring supplier performance against key performance indicators ensures the procurement team maintains strong relationships with suppliers and achieves business growth. 

Continuously Improve 

Continuous improvement of procurement practices, informed by procurement KPIs and performance tracking through RohanProcure, leads to better procurement outcomes over time. 

Tactics to Boost Procurement Efficiency 

Procuring without a strategy would leave many organizations chasing unnecessary goals and standards. Tracking efficiency with these steps is crucial to success. 

Set Procurement KPIs 

Setting measurable procurement KPIs helps procurement leaders benchmark success, improve procurement strategy, and make smarter procurement decisions. 

Keep an Eye on Compliance 

Compliance with legal, ethical, and company-specific procurement guidelines reduces risks and supports strong supplier relationships. 

Centralize your Data 

Centralized procurement data promotes better visibility, informed purchasing decisions, and reduces delays across the entire procurement process. 

Expand and Strengthen your Supplier Network 

Engaging a wide range of suppliers through competitive bidding processes ensures companies maintain flexibility, attention to prices, and access to competitive offers. 

Ready for Your Procurement Process to Reach the Next Level? 

If you’re ready to optimize your procurement lifecycle, drive business growth, and improve supplier management, it’s time to explore Rohirrim’s RohanProcure. Our cutting-edge procurement software supports procurement professionals through every step of the procurement process — from needs recognition to contract administration. 

Contact Rohirrim today and discover how RohanProcure can transform your procurement operations, boost efficiency, and set your business on the path to success! 

FAQ 

What are the eight steps of the procurement process? 

The eight steps of the procurement process are needs recognition, purchase requisition, requisition review, solicitation process, evaluation and contract award, order management, invoice approvals and disputes, and record keeping. These steps ensure an efficient procurement cycle from identifying needs to maintaining accurate records for future use. 

What are the five procurement procedures? 

The five procurement procedures typically include identifying needs, supplier research and selection, contract negotiation, purchase order management, and payment processing. 

What are the types of procurement? 

The main types of procurement are direct procurement, indirect procurement, and services procurement, each supporting different business requirements and supply chain needs. 

What are the 5 P’s in procurement? 

The 5 P’s in procurement are price, product, place, promotion, and people, representing the key factors influencing effective procurement strategies. 

What is the difference between procurement and purchasing? 

Procurement is the broader process of sourcing, negotiating, and acquiring goods or services, while purchasing specifically refers to the transactional act of buying those goods or services. 

Tate Sundberg

BDR