What is Procurement? – What Does it Mean for Your Business?

25th January 2022

What is procurement?

So, what is procurement?

Procurement is, quite simply, the act of acquiring goods and/or services through a tendering or competitive bid process. This is where the buyer will release a ‘contract notice’ through an electronic portal (known as e-tendering, or e-procurement software). This typically includes:

  • The contract title and description of goods/services required
  • A specification and/or scope of works
  • The approximate contract value/ budget
  • The length of delivery required
  • The location of delivery
  • Details surrounding the timetable for the tendering process, including the submission deadline, site visit dates and clarification deadlines
  • The tendering documents to be completed (such as SQ/PQQ documents, ITT documents, RFPs or RFQs).

Suppliers will then put together a tender response in line with the provided guidance. The buyer will then assess all of the responses against the evaluation criteria they have chosen. Finally, a supplier will be awarded the contract.

How is procurement different to purchasing?

The distinction between procurement and purchasing can be confusing if you are new to the process. In fact, it is common to hear the terms being used interchangeably. However, in this instance, the difference between procurement and purchasing is this:

  • Procurement is the umbrella term for the entire process of sourcing, selecting and acquiring goods or services. From conception to conclusion.
  • Purchasing is just one small part of the procurement process and does not cover the other stages. For example, it does not cover the specification of works, management of the procurement process, bidding or evaluation.

Why is procurement important?

Now you can answer the question, ‘what is procurement?’ But why is it important?

Procurement is an important, democratic process (when done correctly!) which is especially vital to businesses for the following reasons:

  • It can save you money

The procurement process will allow you the best chance to find a supplier that offers the best value for money. Most often, buyers will evaluate tenders through the MEAT method (most economically advantageous tender). In other words, buyers are typically looking for the best quality service for the lowest price.

  • It widens the scope of your options

The procurement process allows the buyer to find a supplier who will offer the best value for money. However, it can do more than that. The process also enables buyers to receive tenders from potential suppliers across the country. These suppliers may offer experience and added value that local suppliers do not, or cannot.

Essentially, the procurement process levels the playing field. It allows the buyer a better opportunity to gauge the suitability of multiple suppliers. 

How could procurement benefit YOUR business?

Procurement specialists are available to advise on specifics relevant to your particular industry and business. However, there are several reasons why breaking into procurement could revolutionise the way you source goods and services: 

  • It streamlines the workload

Let’s say you require a new supplier to provide an ongoing service. You want to ensure that you are getting the best possible supplier and that they meet all of your requirements. It would be a poor use of staffing resources to dedicate personnel to researching and contacting potential businesses. This could take an inordinate amount of time and still not result in finding a supplier that meets your requirements! By going through the procurement process, you can streamline that normally weighty task through following these simple steps:

    • Identify the need (what service/goods does your business require?)
    • Authorise the decision to find a supplier who can address this need
    • Establish the parameters of the proposed contract (budget, duration, essential vs. desirable requirements, etc)
    • Create the tender documentation (including the specification, scope of works, supplier questionnaire, instructions to tenderers, pricing document, etc)
    • Publish the tender through the public procurement portal of your choosing
    • Evaluate the tender submissions against your chosen criteria
    • Award the contract to your chosen supplier.
  • Ensures accountability

It gives you the opportunity to explicitly state your requirements and the standards you expect from potential suppliers. For example, this could include minimum annual turnover, compliance with industry-specific standards, or evidence of previous experience. As a result, suppliers can be held accountable if they fail to meet these standards after securing the contract.

  • Prevents corruption

By having suppliers fill out a selection questionnaire (SQ), you can screen companies for information. This could include breaches of lawful, environmental or health and safety obligations. Additionally, you can request evidence (such as financial records) that they will not pose a financial risk to your operation.

In order to pass the selection questionnaire, suppliers are required to self-certify that they meet all necessary requirements. They can also be held fully accountable if this is not the case.

Common mistakes in procurement that you should avoid

  1. Accepting prices without negotiation

While negotiation isn’t always necessary, it’s still something you should consider – especially for those new to procurement. It’s important that you choose the supplier that’s offering the best value for money. So, you need to consider this when assessing their pricing.

  1. Ignoring risks 

This might sound obvious, but many buyers are caught out by ignoring risks. So, when you’re evaluating tender responses, assess the risks associated with each supplier. What impact(s) could those risks have on your organisation?

  1. Going above your budget

If you agree a budget with a supplier, you’ll be required to stick to it. Therefore, it’s important that you’re able to deliver the budget you state in the tender specifications. Paying more than you can afford could be detrimental for your business.

What if you need help with your procurement activities?

So, we’ve answered the most important question – what is procurement? However, what if you need a bit of extra support?

If you need support with the procurement process, why not outsource your procurement activities to a professional? Procurement Consultants can help your organisation in many ways, including:

  • They can assess your spending behaviour 

Firstly, a Procurement Consultant can do a full analysis of your organisation’s spending behaviour. This will help you make improvements and, ultimately, save you money.

To do this, your procurement professional will ask for your organisation’s transaction data. For example, they might ask to see details of the vendor and their values from a certain time period.

Are you interested in this level of support? Then our Procure Analyse service is the perfect solution for you! With this service, our Procurement Consultants will conduct a high-level, vendor-led analysis of your spending behaviour. They’ll provide you with a summary of their findings, and even help you identify areas that could be improved.

  • Support your Procurement Team

Many organisations don’t need to outsource their full procurement function. Instead, they just need a little extra support or an extra pair of hands. And that’s where a Procurement Consultant comes in!

Don’t worry if you don’t have an in-house Procurement Team. If you’re looking for answers to, ‘what is procurement’, then chances are, you’re new to the entire process! If that’s the case, then you might be interested in Procure Outsourcing – a service designed for fully outsourced solutions!

We can work as an extension of your in-house team, offering as much or as little support as you need. This could be extra guidance, full management of the end-to-end process, or anything in between.

  • Share their knowledge and expertise 

Now you know the answer to the key question: What is procurement? However, there is so much more to consider! And that’s where a procurement professional can help.

A Procurement Consultant has the knowledge and expertise to guide you through the full procurement process. So, whether you require ad-hoc support or help with your entire procurement strategy, outsourcing could be perfect for you.

  • They’ll save you time

While necessary for your business, the procurement process can be extremely time-consuming. However, when you outsource procurement consultancy services, a Procurement Consultant will handle everything for you. Instead of developing procurement strategies or identifying areas for improvement, you can focus on other aspects of your organisation.

Procurement: First steps

If you are considering embarking into procurement and want to know how it will benefit your business, contact the team! We will advise you on:

  • How to identify and respond to a need for procurement in your business
  • Ways to select and create appropriate tender documentation that is relevant to your particular procurement opportunity
  • How to manage the procurement process in a way that maximises your opportunities and encourages high-quality suppliers to engage
  • Ways to draw up a clear, detailed specification of requirements that ensures suppliers will provide you with meaningful information.

Procurement doesn’t have to be confusing. You simply need to ensure that you begin your journey with as much information and specialist guidance as possible.

How do you know if you need support?  

Are you unsure whether your organisation would benefit from outsourcing procurement consultancy services? If that’s the case, try asking yourself the following questions:

  • Have you noticed a need to lower costs at your organisation?
  • Are you able to analyse your spending behaviour effectively in-house?
  • Do you have enough time and resources to dedicate to your purchasing practices?
  • Are you able to produce tender documents, such as project specifications?
  • Can you analyse tender responses and find the best supplier for your needs?

In summary

Simply put, procurement is the act of acquiring goods or services through a competitive bid process. It offers many advantages to buyers. Procurement can save you money, and also widen the scope of your options. It can also ensure accountability among suppliers, prevents corruption and streamlines the workload.

If you need extra support with your procurement activity, you might benefit from outsourcing to a procurement professional. Here’s what they can do for your organisation:

  • They can assess your spending behaviour
  • Support your Procurement Team
  • Share their knowledge and expertise.

Not sure if you need support? Think about your answers to these questions:

  • Have you noticed a need to lower costs at your organisation?
  • Are you able to analyse your spending behaviour effectively in-house?
  • Do you have enough time and resources to dedicate to your purchasing practices?
  • Are you able to produce tender documents, such as project specifications?
  • Can you analyse tender responses and find the best supplier for your needs?

How can Hudson Procure help your business?

At Hudson Procure, our procurement experts have nearly two decades of experience. No matter what kind of support you’re looking for, we can help.

Procure Consult

With Procure Consult, we offer support with tender management and ad-hoc procurement consultancy. Our expert team will manage the end-to-end procurement process or offer assistance with any stage, as and when required. 

Procure Health Check

With Procure Health Check, we’ll conduct a full review of the strategic and operational procurement processes within your organisation. We’ll identify the areas that need improvement and help you drive greater value from the procurement process. 

Procure Analyse

The purpose of Procure Analyse is to conduct a high-level analysis of your spending activity. We’ll help you understand your current purchasing behaviour and highlight areas that can deliver greater value. Procure Analyse is also offered as part of Procure Health Check or as a standalone service. 

Procure Outsourcing

With Procure Outsourcing, we deliver a range of procurement solutions on an outsourced basis, completely bespoke to you. This can range from delivering multiple tender projects as a package to delivering the full procurement function of your organisation. 

Procure Post 

Are you trying to find a supplier for your project? Post your tendering opportunity onto any of our 11 sector-specific portals for FREE with Procure Post!

Housed by our sister company, Hudson Discover, our portals host thousands of tendering opportunities for organisations of all sizesFor an additional cost, we’ll even help you identify your requirements and find the most suitable suppliers for your business.

Get in touch for a consultation and find out how we can help your business drive better value from procurement.

Check out our other blogs for further Procurement Insights:

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