Procurement Management Process - The 2020 Guide

Paper-driven procurement has a cascading effect on an organization's bottom line. Manual

inefficiencies cost organizations a huge chunk of cash in long purchase cycles, missed discounts,
and transaction disputes. Trying to speed up procurement processes with outdated tools like
spreadsheets and emails is like trying to start a microwave with steel and flint.
To take advantage of early purchase and payment discounts, organizations need to toss stone-age
procurement practices out the window and embrace technological solutions. Modern
procurement tools can transform a painfully slow procurement strategy to world class overnight.
If your procurement process still relies on ancient tools, it's time for a major technology
makeover. Here's all you need to know to power up the procurement process.
What is Procurement?
Procurement refers to techniques, structured methods, and means used to streamline an
organization's procurement process and achieve desired results while saving cost, reducing time,
and building win-win supplier relationships. Procurement can be direct, indirect, reactive, or
proactive in nature.

What's the difference between indirect, direct, and services procurement?

Direct, indirect, and services procurement are subsidiaries of the overarching procurement
process and differ in aspects like definition, assignments, and more. By taking a deeper look at
the difference between these processes and understanding what they comprise; stakeholders will
have an easier time taking appropriate measures to fulfill the need.

Direct Procurement Indirect Procurement Services Procurement

Acquisition of goods, materials, Sourcing and purchasing Procuring and managing
and/or services manufacturing materials, goods, or services for contingent workforce and
purposes internal use consulting services
Ex: Raw materials, machinery, and Ex: Utilities, facility management, Ex: Professional services, software
resale items and travel subscriptions, etc.
Drives external profit and Takes care of day-to-day Used to plug process and people
continuous growth in revenue operations gaps
Comprises of stock materials or Used to buy consumables and Used to purchase external services
parts for production perishables and staff
Establish long-term, collaborative Resort to short-term, transactional Maintain one-off, contractual
supplier relationships relationship with suppliers relationships with suppliers
What is a Procurement Process?
It's the series of processes that are essential to get products or services from requisition
to purchase order and invoice approval. Although we use procurement' and purchasing'
interchangeably, they slightly differ from each other.
While purchasing is the overarching process of obtaining necessary goods and services on behalf
of an organization, procurement describes the activities involved in obtaining them. The
procurement process in an organization is unique to its context and operations.
Regardless of the uniqueness, every procurement management process consists of 3 Ps', namely
Process, People, and Paperwork.
1. Process
The list of rules that need to be followed while reviewing, ordering, obtaining, and paying for
goods/services. Checkpoints/steps increase with the complexity of the purchase.
2. People
These are stakeholders and their specific responsibility in the procurement cycle. They take care
of initiating or authorizing every stage of the process. The number of stakeholders involved is
directly proportional to the risk and value of the purchase.
3. Paper
This refers to the paperwork and documentation involved in every stage of the procurement
process flow, all of which are collected and stored for reference and auditing reasons.
Procurement automation is more than saving time and money

What Is the Procurement Process Flow?

To keep the procurement management process fair, transparent, and efficient, a good
understanding of the procurement process flow is key. Although the procurement process of
organizations differs from each other, the flowchart below sums up the important steps in a
procurement process.
Steps involved in a Procurement Process
Every procurement management process involves several elements, including requirements
determination, supplier research, value analysis, raising a purchase request, reviewal phase,
conversion to purchase order, contract administration, monitoring/evaluation of received order,
three-way matching, payment fulfilment, and record keeping. These are the important stages in
the procurement process flow:
Step 0: Needs Recognition
The needs recognition stage of a procurement process enables businesses to sketch out an
accurate plan for procuring goods and services in a timely manner and at a reasonable cost.
Step 1: Purchase Requisition
Purchase requisitionare written or electronic documents raised by internal users/customers
seeking the procurement team's help to fulfill an existing need. It comprises key information that
is required to procure the right goods, services, or works.
Step 2: Requisition review
The procurement process will officially commence only after the purchase requisition is
approved and cross-check for budget availability. In the review stage, functional managers or
department heads review the requisition package and double-check if there is a genuine need for
the requested goods or service and also verify whether necessary funding is available.
Approved purchase requests become POs, while rejected requests are sent back to the
requisitioner with the reason for rejection. All these can be handled with a simple purchase order
software
Step 3: Solicitation process
Once a requisition is approved and PO is generated, the procurement team will develop an
individual procurement plan and sketch out a corresponding solicitation process. The scope of
this individual solicitation plan depends ultimately on the complexity of the requirement.
Once the budget is approved, the procurement team forwards several requests for quotation
(RFQ) to vendors with the intention to receive and compare bids to shortlist the perfect vendor.
Step 4: Evaluation and contract
 Once the solicitation process is officially closed, the procurement team in conjunction with the
evaluation committee will review and evaluate supplier quotations to determine which supplier
will be the best fit to fulfill the existing need.
Once a vendor is selected, the contract negotiation and signing are completed, and the purchase
order is then forwarded to the vendor. A legally binding contract activates right after a vendor
accepts a PO and acknowledges it.
Step 5: Order management
The vendor delivers the promised goods/services within the stipulated timeline. After receiving
them, the purchaser examines the order and notifies the vendor of any issues with the received
items.
At this step, three documents purchase orders, packaging slips (that arrive with the order), and
vendor invoices are lined up and reconciled to pinpoint discrepancies and ensure that the
transaction is accurate. Discrepancies should be addressed once they are discovered.
Step 6: Invoice approvals and disputes
Once three-way matching is complete, the invoice is approved and forwarded to payment
processing depending on organizational norms.
Step 7: Record Keeping
After the payment process, buyers make a record of it for bookkeeping and auditing. All
appropriate documents right from purchase requests to approved invoices are stored in a
centralized location.

Why Should You Automate Your Procurement Management Process?

A solid procurement software can streamline the cluttered procurement process and keep it
transparent. No information is lost and stakeholders can raise, approve, or reject items on time. A
streamlined procurement process offers better control over every stage of the procurement
lifecycle.
Furthermore, efficient procurement automation software:
 Minimizes the chaos made by paperwork
 Shortens the procurement lifecycle
 Reduces human dependency intervention and errors
 Lessens the workload of all stakeholders
 Keeps the process accurate and consistent
 Injects transparency into the process flow
 Sticks to the predefined procurement cycle
Choosing automated procurement management software rather than depending on emails and
excel sheets will speed up the procurement process, ensure accuracy, enhance efficiency, and
save time and resources.
Summary
Cloud-based procurement automation tools like Kissflow are suitable for both SMBs and
enterprises. Kissflow procurement cloud allows organizations to create a dynamic procurement
management process that provides them with a tactical advantage.
 Organizations can resolve procurement hurdles they face with archaic procurement tools.
Today's e-procurement tools are capable of straightening the procurement process flow in a jiffy.
Kissflow offers tools and resources every business needs to automate end-to-end procurement
and scale it up or down to meet their business needs.
Looking for software that strengthens the procurement process and minimizes the chance for
fraud and errors? Read this head-to-head comparison of popular procurement tools in the market.
What does a purchasing manager do?

Would you make a good purchasing manager? Take our career test and find your top matches
from over 800 careers.
What is a Purchasing Manager?
A purchasing manager buys products for organizations to use or resell. They evaluate suppliers,
negotiate contracts, review product quality, and often supervise purchasing agents and buyers. In
smaller companies, the purchasing manager may also act as the agent or buyer.
What does a Purchasing Manager do?
Purchasing managers typically do the following:
 Evaluate suppliers based on price, quality, and delivery speed
 Interview vendors and visit suppliers' plants and distribution centers to examine and learn about
products, services, and prices
 Attend meetings, trade shows, and conferences to learn about new industry trends and make contacts
with suppliers
 Analyze price proposals, financial reports, and other information to determine reasonable prices
 Negotiate contracts on behalf of their organization
 Work out policies with suppliers, such as when products will be delivered
 Meet with staff and vendors to discuss defective or unacceptable goods or services and determine
corrective action
 Evaluate and monitor contracts to be sure that vendors and supplies comply with the terms and
conditions of the contract and to determine need for changes
 Maintain and review records of items bought, costs, deliveries, product performance, and inventories
Purchasing managers buy products, durable and nondurable goods, and services for organizations
and institutions. They try to get the best deal for their organization - the highest quality goods and
services at the lowest cost. They do this by studying sales records and inventory levels of current
stock, identifying foreign and domestic suppliers, and keeping up to date with changes affecting
both the supply of, and demand for, products and materials. They consider price, quality,
availability, reliability, and technical support when choosing suppliers and merchandise. To be
effective, they must have a working technical knowledge of the goods or services to be bought.
Evaluating suppliers is one of the most critical functions of a purchasing manager. Many
organizations now run on a lean manufacturing schedule and use just-in-time inventories, so any
delays in the supply chain can shut down production and potentially cost the organization
customers.
Purchasing managers use many resources to find out all they can about potential suppliers. They
attend meetings, trade shows, and conferences to learn about new industry trends and make
contacts with suppliers. They often interview prospective suppliers and visit their plants and
distribution centres to assess their capabilities. For example, they may discuss the design of
products with design engineers, quality concerns with production supervisors, or shipping issues
with managers in the receiving department. They must make certain that the supplier can deliver
the desired goods or services on time, in the correct quantities, and without sacrificing quality.
Once purchasing managers have gathered enough information on the various suppliers, they sign
contracts only with the suppliers who meet the organization's needs, and they place orders. Buyers
who purchase items to resell to customers largely determine which products their organization will
sell. They need to be able to predict what will appeal to their customers. If they are wrong, they
could jeopardize the profits and reputation of their organization.
Are you suited to be a purchasing manager?
Purchasing managers have distinct personalities. They tend to be enterprising individuals, which
means they’re adventurous, ambitious, assertive, extroverted, energetic, enthusiastic, confident,
and optimistic. They are dominant, persuasive, and motivational. Some of them are also
conventional, meaning they’re conscientious and conservative.
Does this sound like you? Take our free career test to find out if purchasing manager is one of your
top career matches.

What is the workplace of a Purchasing Manager like?

Most purchasing managers work in comfortable offices. Travel is sometimes necessary to visit
vendors, and purchasers for global organizations may need to travel outside the country.
What is Purchasing?
Purchasing is a simple transaction, when companies pay for and receive goods or services.
Purchasing can be considered a subset of procurement. For a small business with no procurement
department, this may mean a phone call to an office supply store when the supply of pens runs
low or a new computer is needed. Small businesses often lack the purchasing power of a major
enterprise and have no leverage with which to negotiate.
A simple purchasing process is generally performed on a transactional basis with little strategy:
1. Placing the order
Without strategy, goods and services are ordered as needed. Reactive purchasing comes with
a host of money-wasting issues. Businesses that buy on demand without approved purchase
orders (PO) typically lack oversight and budget control.
2. Supplier communications
Most companies have a established list of suppliers they work with to purchase supplies.
3. Receiving of goods or services
Purchasing requires receipt of goods and services. Good purchasing strategy includes
protocols for recording and tracking purchases.
4. Invoice receipting
 In companies with no procurement department, invoices are usually sent to accounts
payable. With no automated tracking system, each invoice recording must be verified by
hand, an inefficient and time-consuming process prone to error.
5. Supplier payment
Invoices are typically paid without completing the 3-way match to verify the invoice against
the PO and packing slip. Common results of poor strategy include late payments, over-
payments for items not delivered, and duplicate payments.
For a growing business, purchasing without procurement strategy has distinct disadvantages.
Lack of control, purchasing rules, preferred vendor relationships, and accurate metrics leaves
companies vulnerable to fraud and overpayment. Well defined procurement process helps
minimize spend, even for a small business.
“In essence, the procurement process is a comprehensive set of strategies and protocols
designed to extract the best value of purchasing; purchasing is the end result – the transaction.”
What is Procurement?
Procurement is a far more over-arching concept, encompassing end-to-end supply chain
management strategies for sourcing, negotiation of contracts and acquiring goods, raw materials,
services or work from external sources, then following through to ensure contracts are fulfilled
according to contract terms. The ultimate long-term goals of the procurement function are cost
savings, spend control, and workflow efficiency.
Where a simple purchasing decision may include considerations such as price, delivery, and
convenience, procurement plans are a corporate strategy with a comprehensive overview of
every detail affecting purchases.
Procurement considerations include:
 Business ethics
Today’s consumers expect businesses to conform to certain standards, and sourcing
scandals can be fatal. Distasteful stories of sweatshops or destructive mining processes
sweep social media like wildfire, burning customer trust in its wake. Procurement
department responsibilities include ensuring that company values are upheld and raw
materials are sourced in ethical, legal, and customer-approved ways.
 Logistics
What is the optimal method of delivery, factoring in time, cost, taxes and tariffs, risk, and
ethical considerations? Procurement departments determine the most efficient and timely
ways to receive goods.
 Quality
In some industries, it can be acceptable to cut corners to save money. Tee shirts made of
thinner fabric, for example, are harmless and cheaper fabric may even appeal to buyers.
In other industries, quality of materials is the single most important consideration.
Building projects and food products are examples of industries where cutting quality can
be dangerous. Procurement strategy includes identifying the best possible quality at the
lowest price.
 Supplier capability
 Procurement departments keep a close eye on suppliers, making sure they are capable of
delivering the quantity needed on time. Strategic sourcing includes alternate plans for
suppliers who may be in the path of a disruptive event capable of destroying supply lines,
like a hurricane or flood. These sourcing activities can ensure the supply chain is not
disrupted.
 Cost
the price of raw materials is an issue for every business.  Typically, a procurement
department uses a tendering or competitive bidding process to request proposals from
trusted suppliers and ensure the lowest price and most favorable payment terms after all
other considerations are factored.
 Overall budget
One benefit of a centralized procurement department is enhanced buying power. By
consolidating spend from all departments, a savvy procurement manager can negotiate
better deals based on bulk pricing.
 Spend control
Comprehensive procurement strategy identifies spend categories and sets protocols for
purchasing based on category, expected purchases, or dollar amounts. Tight control
eliminates maverick spending and unapproved purchasing while simplifying expected
purchases.
 Risk analysis
Systematic identification, assessment and strategies to minimize risk contribute
significantly to procurement success.  Risk management is integral to effective
procurement management, particularly for large scale or geographically diverse
businesses.
 Establish protocols for purchasing
Procurement strategy facilitates ordering and eliminates bottlenecks by establishing
governing rules for automated purchases and defining the process for goods and services
requiring approval.
 Accounts payable
The procurement department uses 3-way matching to verify invoices against the purchase
order and goods receipt. This eliminates duplicate payments, ensures invoice items are
delivered as promised, and flags invoices for timely payment in the procure-to-pay cycle.
A strategic approach to procurement seeks to streamline operations by defining every aspect of
the supply chain and setting protocols for purchase requisition, automated spend, approval
process, and optimal delivery options.
Where a purchase begins and ends with the acquisition of goods and services, procurement is an
ongoing detailed design process to make informed buying decisions based on available data,
which must be kept up to date. The purchasing department continually seeks to optimize and
improve supplier relationships, forge connections, and find ways to lower supply chain cost and
minimize losses.
Purchasing: 6 Major Principles of Purchasing – Explained!
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Some of the major principles of purchasing are: 1. Right Quality 2. Right Quantity 3. Right Time
4. Right Source 5. Right Price and 6. Right Place.
1. Right Quality:
The term right quality refers to a suitability of an item for the purpose it is required. For
producing the goods of best quality, the best grade of raw material may be the right quality
whereas for producing items of medium quality, the average lowest grade may be the right
quality.
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The quality of the item is called as grades. It can be measured by physical tests, chemical
analysis or by any other methods depending upon the nature of a product. The use of standard
specification, brand name or trade name helps in purchasing the squired qualities of materials.
‘The quality must be built into the product’. It is the duty of the purchasing department to ensure
that materials are purchased from those suppliers.
For creating goodwill, right production, standardisation, elimination of waste and for better
results, right quality purchases are very essential. Quality for different materials is decided by the
concerned departments.
In case of workshop equipment, the decision is taken by the plant engineer and for stationery it is
the user department. However, purchase department may question the requirements of the
different departments on the basis of its experience and suggest various alternatives. The
inspection department must verify whether the goods supplied are in accordance with the order
placed.
Thus, the right quality is the suitability of items purchased for a given purpose. The best quality
of materials purchased need not be the right quality.
2. Right Quantity:
Materials purchased should be of right quantity. The right quantity is the quantity that may be
purchased at a time with the minimum total cost and which obviates shortage of materials.
Ensuring and maintaining a regular flow of materials for carrying the production activity is the
vital aim of any purchase organisation. Excess purchases should be avoided, it results in
overstocking and capital is unnecessarily blocked and inventory carrying cost goes up.
ADVERTISEMENTS:
Economic Order Quantity (EOQ) helps in determining the right quantity of materials to be
ordered. It is calculated by applying the following formula:
EOQ =
A stands for annual consumption of material, C for cost of placing an order and S for Annual
Storage and carrying cost per unit.
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For dedicing the amount of right quantity to be purchased, certain important factors must be
considered by the management. These are the nature of the manufacturing process, the nature of
material to be used, prevailing market conditions i.e., changes in the tastes and preferences of the
people, cost of materials to be purchased, cost of possession and storing capacity of the
organisation.
Along with the economic order quantity, there are two more concepts, viz.; bulk order quantity
and arbitrary order quantity which needs to be understood.
Bulk Order Quantity is the quantity which is larger than the economic order quantity. It
combines the ordering quantity of more than one order so as to round off to 3, 6 or 12 monthly
requirements and place a single order for the full requirements of a period under consideration.
Bulk order quantity ensures various economies of price, lesser operational cost in the purchase
department. Inexpensive and slow moving items are generally purchased in bulk quantity.
ADVERTISEMENTS:
Arbitrary Order Quantity is the outcome of the weaknesses of economic order quantity and bulk
order quantity. Due to varying market conditions, it is not advisable to always strictly adhere to
the economic and bulk order quantities.
Certain factors viz.; uncertain order from the market, uncertain financial position, uncertain
production schedule and uncertain lead time are responsible for the adoption of arbitrary order
quantity on the part of the purchase manager.
3. Right Time:
The time at which the purchases are to be made is of vital importance. In case of items used
regularly, right time means the time when the stock reaches the minimum level. The reorder
level of material is fixed for each item under the principle of right time.
Action for the purchase of new supplies should be immediately initiated, when the material
reaches the reorder level. Reorder level for each type of material is calculated by applying the
following formula.
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Reorder level = Maximum Consumption x Maximum Reorder Period. The materials control
department sends the purchase requisition to be purchase department for the purchase of
materials. In case materials are required for special jobs, the Purchase Department ensures that
the materials are delivered in time.
Another important factor to be considered is the delivery of materials from stores to production
departments. Any under delay in supplying the materials on different jobs delays the production.
4. Right Source:
Selecting the right source for the purchase of materials is an important consideration in the
purchase procedure. The right source for the procurement of materials is that supplier who can
supply the material of right quality as ordered, in right quantity as ordered, at a right time at
which the materials were required to be supplied, at an agreed price with the supplier, who is in a
position to honour the commitment without much follow- up, who has necessary financial
resources and adequate man-power to handle the order and who is well established with higher
reputation and proven business integrity.
The source of material should be located within a reasonable distance from the buyer’s
organisation. This will minimise the delivery delays, higher transportation charges and improve
the personal contact between the buyer and the supplier and enable better after-sales service etc.
As far as possible the middlemen and brokers should be avoided in the purchase of materials. A
direct liaison should be established with the supplier. It would be helpful in improving the
quality of the material in future.
While selecting the supplier certain factors must be kept in mind, viz., location of the supplier,
warehousing facilities available with the supplier, relations of the employers with the labour,
credit worthiness of the supplier, size of the supplier’s firm and quality control observed by the
employer etc. A personal visit to prospective supplier’s premises will be helpful in assessing the
capabilities of the supplier.
5. Right Price:
Determination of right price is a difficult task. It is the main object of any organisation to procure
the material items at the right price. It is that price which brings the best ultimate value of the
money invested in purchasing the materials.
Deciding the right price of a product depends on variety of factors, viz.; quality, delivery time
and ultimate life of the material, demand and supply curve, extent of competition, government
restrictions, after sales services, discount offered, and terms of purchase etc. It may be pointed
out here that the determination of proper price depends not only on market knowledge but also a
clear understanding of the pricing process.
The buyer should keep in touch himself with the above mentioned factors in the process of
determination of price. He must consider that whether a proposed item to be purchased
represents the best value for money or not.
This is known as “value analysis”. The prevailing market prices also provide basis for the price
determination. There should be negotiation between the purchase department and the suppliers
for the determination of proper price.
6. Right Place:
Besides obtaining the materials of the right quality and quantity from the right source at the right
price, it should be ensured that the materials are available at the right place. Transportation and
material handling costs are greatly affected by the selection of the right place from where the
materials are to be acquired. For minimising these costs, selection of right place for the
acquisition of material is of utmost importance. If local as well as outside supplier fulfills these
conditions, the former should be preferred. The above mentioned principles of purchasing can be
summed up as the six R’s of purchasing. These are also known as the “essentials” to be followed
by the purchasing executive.
What’s the Difference between Procurement and Purchasing?
Published On August 20, 2020 • Procurement Process
 Procurement is often mistaken for purchasing, and the two terms are often used interchangeably.
But those two functions are actually quite distinct—in their intent, the tasks they cover, the
people involved and, most notably, what they accomplish.
If you ask a layman about the difference, you may get a reply that purchasing and procurement
are one and the same. But, if you ask the same question to a procurement officer of an enterprise,
you’ll get a significantly longer answer as to how and why there’s a world of differences
between purchasing and procurement.
It is true that a few organizations prefer to use one term over the other, but failing to learn the
key differences between purchasing and procurement can make an organization overlook key
components that have the potential break an organization’s bottom line.
Now, let’s dive deeper into the concept of ‘procurement vs purchasing’, and see how they differ
from each other.
What is Procurement?
Procurement refers to the process of identifying, shortlisting, selecting, and acquiring suitable
goods or services or works from a third party vendor through a direct purchase, competitive
bidding, or tendering process while ensuring timely delivery in the right quality and quantity.
An end-to-end procurement process consists of the steps listed below:
 Surveying the market
 Spotting potential suppliers
 Creating an approved list of vendors
 Spotting internal needs
 Creating a purchase order online
 Requesting proposals and evaluating quotations
 Selecting the right supplier and negotiating effectively
 Receiving goods and performing quality checks
 Developing and managing contracts
 Obtaining invoice approvals and fulfilling payment terms
 Establishing a good supplier relationship
What is purchasing?
Purchasing is the set of functions associated with acquiring the goods and services that an
organization requires. Purchasing is a small subset of the broader procurement function. This
process includes activities like ordering, expediting, receiving, and fulfilling payment.
Listed below are the steps in the purchasing process:
 Obtaining a purchase requisition
 Requesting proposals and evaluating quotations
 Dispatching official purchase orders
 Receiving products and services
 Checking the quality of delivered items
 Effecting payment to vendors
Procurement vs. purchasing: similarities and differences
Purchasing and procurement are two processes that are done during the process of acquiring
goods and services for an organization. However, they vastly differ in their method and
approach. This table represents their key differences between procurement and purchasing:

Procurement
Activities related to acquiring
goods and services
Steps that happen before,
during, and after purchase
Used in a production
environment (internal process)
Puts more importance on
an item’s value than its cost
Refers to a set of tasks
that spot and fulfill needs
Includes need recognition,
sourcing, and contract closure
Follows a proactive approach
Purchasing
Functions associated with buying
goods and services
Straightforward process of
purchasing commodities
Used in a wholesale environment
(external process)
Tends to focus more on the item’s
price than its value
Refers to the specific task
of committing expenditure
Includes ordering, expediting,
and payment fulfillment
Follows a reactive approach to
 Procurement Purchasing
 to spot and fulfill needs satisfy internal needs
Relational–focuses on Transactional–focuses on
creating long-term vendor relationships transactions than vendor relationships
In addition to the list of differences mentioned above, procurement vs. purchasing includes
another major difference. Purchasing focuses on short-term goals such as fulfilling the five rights
in a transaction (right quality, right quantity, right cost, right time, and right place), whereas
procurement management focuses on strategic, long-term goals like gaining a competitive
advantage or aligning itself with corporate strategy or goals.
8 Key Benefits of Automate Your Procurement Processes Today

The impact of an e-procurement solution

Whether you look at it as purchasing or procurement, there are a number of stakeholders
involved–from internal parties like employees in different departments to external people like
vendors and contract negotiators. Irrespective of their differences mentioned in the procurement
vs. purchasing table, both processes demand meticulous documentation. They both comprise a
complex web of procedures.
A single purchasing cycle might last for weeks, whereas a whole procurement cycle can last for
months or even repeated if a suitable bid is not found. If performed manually, both activities will
have a common detriment of efficiency. Just the process of revising every document, evaluating
every bid, and reviewing every invoice will cause too much delay.
A comprehensive digital procure-to-pay solution, on the other hand, allows organizations to store
all purchasing and procurement related files in one centralized database. While a shared network
drive can fulfill this purpose, cloud-based procurement software like Kissflow’s Procurement
Cloud can automate tasks offer a level of convenience and efficiency that a manual system
simply can’t match.
Recommended Reading:

 Top 6 Challenges in Procurement and How to Overcome Those

Procurement or purchasing, who is the winner,?

In the battle between procurement vs. purchasing, there is no clear winner.
Companies should pick an approach based on their unique needs. Small businesses may choose
purchasing with an intention of keeping the process clean and simple, whereas enterprises may
prefer a full-fledged procurement process just to make it a core part of their corporate strategy.
Whatever approach you choose to follow, manual tools like paper forms, spreadsheets, and Word
documents will end up doing more harm than good. Cloud-based digital procurement software
like Kissflow improves productivity by standardizing strictly regulated processes like
procurement and purchasing.
Thinking of revamping your purchasing or procurement process? Take a look at the list of
benefits an ideal procurement software can offer your procurement team and help you create
painless procurement processes from start to finish–PR to invoicing and
The 7 Core Purchasing Strategies!

Purpose of Purchasing Strategies?

Companies implement purchasing strategies in order to:
1. make cost effective purchasing decisions from a group of efficient vendors who will
2. deliver quality goods
3. on time and at
4. mutually agreeable terms.
Examples of Purchasing Strategies...
Some purchasing strategies may include such choices as making procurement savings by
using centralized purchasing which is concentrating the entire procurement activities within
one principal location & source of authority.
1. Single Source Procurement
For example some companies may decide to undertake a single source procurement
strategy that involves obtaining excellent dedicated service from a single vendor.  These
strategies are predominant when sourcing for IT or indirect purchasing such as office supplies
and cleaning.
2. Purchasing Cycle
Other companies may use a procurement strategy of using a core purchasing cycle.  This is
where they order from a group of regular vendors and use outsourcing procurement for their
larger and ad hoc purchases.
3. Procurement Auctions
Still others, particularly when they are seeking labor for short-term projects will
use procurement auctions in order to obtain the best pricing levels.
Regardless of the size of the company, there is a core group of 7 purchasing strategies that most
of them implement.  
1. Supplier Optimization & Relationship Building
The company chooses an optimum mix of vendors who can provide the best prices and terms. 
This process usually means that the less able suppliers who cannot provide a quality service at
the terms and prices required are discarded.  This is by far the most common of the various
purchasing strategies.
2. Total Qualify Methods (TQM)
Total Quality Methods, require the vendors to provide an ever increasing quality service with
zero errors. The supplier ensures purchasing best practices using a number of tools such as six
sigma.
3. Risk Management
As more companies obtain their supplies from countries such as China and India, they are more
concerned with the risk management of this supply chain. Whilst these countries can supply
products at very advantageous prices, these advantages can be soon negated by a natural or
human disaster.
Japan's Fukushima Nuclear Disaster in 2011 shook up the supply chain as in the race to provide
better quality at lower prices, manufacturers picked very narrow, optimized supply chain. They
put all their eggs with one supplier that had the best product at the lowest price. This resulted in
production delays, product shortages and higher prices, since manufacturers had not factored
risks from a natural disaster of such a great scale.
With Covid-19 in 2020 the situation became 'funny'. When Covid-19 hit China in January 2020
Buyers from Europe were confirming whether their Chinese suppliers could deliver as agreed -
these suppliers were struggling to meet demand due to lock-downs in China.
However 2 months later the situation 'turned-around' because Covid-19 hit Europe, US & other
parts of the world - now the Buyers were asking their Chinese suppliers to delay delivery as they
were not operating due to lock-downs in Europe. 
4. Global Sourcing
Large multinational companies see the world as one large market and source from many vendors,
regardless of their country of origin.
Implementing a global strategic sourcing strategy means efficiently sourcing goods and services
from any country that can manufacture the goods or provide the service more economically. 
While Global Sourcing is here to stay, organisations need to tread carefully and have plans in
place to manage risks.
5. Vendor Development
Depending on the scale and depth of services or goods a vendor provides, it might be necessary
to work closely with such vendors.  Helping in developing processes that assist these vendors to
come with better or cheaper products, helps companies to reduce costs. 
Or in cases where a company is dependent upon just one supplier for their products & the
supplier is unable to perform to the required standards, the purchaser may assist the vendor in
improving their service or implement processes to improve their procurement cycle. This
ultimately would help the purchaser/buyer have a reliable supplier and product deliveries.
6. Green Purchasing
This is one of the more common purchasing strategies for governments and local governments.
This strategy champions the need for recycling and purchasing products that have a negative
impact on the environment.
7. Building & Training People's Procurement Skills
While training people is the soft-side of purchasing & procurement strategies, this is probably
the most important strategy - all the other strategies above would have to be implemented by
people, and if they don't have the necessary skills to deliver the procurement strategy, the
strategy delivery will fail.
For many years since it started in 2014, Deloitte Annual CPO Survey reveals that more than
half of CPO's & Procurement Director's worldwide, say that their teams do not have the
necessary skills & capabilities to deliver their procurement strategy. This number remains more
or less constant regardless of the year the survey is published.
What Do Procurement & Purchasing Strategies Accomplish?
Overall effective purchasing strategies are those that help companies promote their procurement
best practices of ...
1. Minimizing costs,
2. Maximizing quality, &
3. Ensuring that quality products are delivered on time.