The Ultimate Guide to the Procurement Process

Did you know that 45% of all businesses fail within 5 years? Businesses fail for all sorts of reasons, but a lot of the time, it has to do with the procurement process. What is the procurement process, you might ask, and what does it have to do with the success of your business?

It has everything to do with choosing the right kind of services and products for your brand. It also has to do with making a profit off of the services and goods that you choose. This may sound like a relatively simple task, but if you don't know all about the procurement process flow, you'll find that it can be much more complicated than you might expect.

For that reason, if you want your business to succeed, then you'll have to know all about the basic procurement process steps. Keep reading and learn more about the procurement process below.

What You Need to Know About the Procurement Process

Suppose that you run a business that assembles and sells phones. To keep your business going, you will need to get all the parts needed to put together these phones such as chips and other devices. Normally, you would need to get a shipment of these phone chips and other supplies every month to keep your business flowing smoothly. 

If something interrupts your shipment and keeps it from arriving on time, this is obviously bad news for your business. You won't have the parts to put together these phones and you won't be able to keep up with the orders from your customers. If you deliver your products late to your customers, your customers will be unhappy as a result.

If your customers are unhappy, they might end up ditching your company and instead take their business to a competing company.

As you can imagine, this can quickly lead to a downward spiral for your entire company if you aren't careful. Fortunately, you won't have to worry so much about this kind of problem if you take the basic practices for procurement to heart. If you take advantage of your procurement process, you'll be able to keep much better track of your shipments, where they're coming from, how long they will take to arrive, and so on. 

The Details

More than that, having a good procurement process will also help you choose better products and services. Overall, your company's goods and shipments will be in much better shape. This is not to mention that you can save money in the process and increase the efficiency of your employees. 

While this may all sound great, you might be wondering where you should start. After all, there are many strategies when it comes to obtaining goods and services on time. However, there are only a few ways that allow you to be proactive in your business, save money, and reap long-term benefits. 

The first thing you should know is that there are several types of procurement. The three main types include direct procurement, indirect procurement, and services procurement. Once you find out what kind of procurement you need, you will find that the rest of the process will follow quite smoothly. 

The Different Types of Procurement

Because there are several types of procurement, some may fit your business better than others. Before you choose any process, it is important that you find the right one for you and your brand. In some cases, you might need to use several types of procurement.

Whatever the case, it is important that you know the differences between them. That way, you can maximize the success of your business. To start, let's consider direct procurement.

This is a relatively straightforward type of procurement compared to the other types. Direct procurement has to do with obtaining certain goods and services. By obtaining these goods or services, your business will function as usual, but without them, the flow of your business will be interrupted. 

For example, suppose you own a bakery. To make your goods, you need large shipments of flour. Without this flour, you wouldn't be able to make anything and your business would fall into ruin. 

Direct procurement focuses specifically on obtaining goods and services that will make or break your business. This kind of procurement, of course, is very important. It is, in fact, the very foundation of your business no matter what you may sell or provide. 

By ensuring that your direct procurement flow is in good shape, you shouldn't have to worry about missing out on products or services that would negatively affect your business. The next type of procurement you should know about is indirect procurement. 

This type of procurement is similar to the previously discussed type, but there are a few important differences. In particular, this kind of procurement affects the profitability of your business in an indirect fashion. This kind of procurement focuses on saving money and increasing profitability. 

Other Types of Procurement

Indirect procurement is possible by obtaining goods or services that your business needs on a daily basis. However, these goods or services aren't always necessary for your business to function. Suppose that you've been using new software to make your business more organized and fluid. 

You can run your business without this software. However, if you stopped using the software, your business's profits would drop. The overall result would not be good for the success of your business even though your business might still survive. 

The last type of procurement is services procurement. As the name suggests, this type of procurement has to do with finding good and reputable services. The goal of hiring services would usually be to benefit your business's profitability in some way. 

For example, suppose that you're trying to advertise your brand on your own but just can't figure it out. The task is costing you far too much time and money than what it's worth. But if you hire a professional advertiser, you can solve this problem and benefit your business at the same time. 

In some cases, services procurement is also called strategic outsourcing. Whatever the case, all three types of procurement are very important for most, if not all, businesses. Some businesses might need only a few types of procurement while others might need all of them at one time. 

But what are the total benefits of a smooth procurement process anyway?

The Benefits of a Smooth Procurement Process for Your Business

As you have seen, having a faulty procurement process can be detrimental to your business. On the other hand, having a smooth procurement process can skyrocket your business's success. For example, think about how much money you spend every month keeping your business afloat. 

You have to spend money on all sorts of things such as software, sourcing goods and services, marketing, and perhaps even rent. Whatever the case, if you want your business to succeed, you will want to cut down on spending as much as possible. A good procurement process can accomplish this. 

A good procurement process will allow you to obtain goods and services at the best price. It can also help you keep better track of how much you're spending (and saving). Even if you're only saving a little bit every month, these costs will eventually pile up and you'll find that by the end of the year, you might be saving hundreds and even thousands of dollars on products and services. 

What an Efficient Procurement Process Can Do for You

A good procurement process will also make your company much more efficient. As mentioned before, if you can't get your shipments on time, a whole spiral of negative events can occur that can damage your brand. By keeping up with procurement trends, you can make sure that this never happens. 

You'll be able to see ahead of time if there are any shortages of goods or services. That way, you can plan ahead. As long as you do that, you'll never have to worry about late shipments or not having enough supplies to keep your company running as smoothly as it needs to. 

Your Guide to the Procurement Process

If you don't know much about how the procurement process works, you'll soon find your business slipping away from you. Without a good process, you won't be able to keep track of your costs, shipments, goods, or services. But a good procurement process can help you with all of these factors. 

Simply by taking advantage of your brand's procurement process, you can make sure that everything is on track and ready to go. To learn more about the procurement process, contact us here.