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HomeProductsProcurementProcurement Meaning and Why It Is Important in Business

Procurement Meaning and Why It Is Important in Business

Procurement is a fundamental aspect of any business, but what does it really mean, and why is it so important? Have you ever wondered how businesses ensure they have the right materials and services at the right time and cost? Do you find yourself asking if there’s a better way to handle procurement challenges?

In Singapore, a global business hub, understanding the meaning and significance of procurement is crucial for the success of both large corporations and small enterprises.

Let’s explore the essence of procurement and why it matters in the day-to-day operations of businesses, including the common hurdles they face.

Key Takeaways

  • Procurement involves acquiring goods or services from third-party suppliers, aiming to obtain competitively priced supplies that offer the most value. It encompasses tasks such as supplier identification, negotiation, order placement, goods inspection, and process documentation.
  • There are four main types of procurement which includes direct procurement, indirect procurement, goods procurement, services procurement.
  • The procurement process involves identifying needs, selecting vendors, negotiating terms, making purchases, receiving goods or services, and managing the entire process systematically.
  • Procurement is crucial for businesses as it helps in locating reliable suppliers, reducing costs, and selecting vendors that consistently deliver high-quality goods and services.



Table of Content:

    What Is the Meaning of Procurement?

    What Is the Meaning of Procurement

    Procurement is the process of acquiring goods or services from third-party suppliers. Its main objective is to obtain competitively priced supplies that offer the most value.

    While the definition of procurement can vary, some view it as a broader process that encompasses all stages. Meanwhile, others define it more narrowly as issuing purchase orders and making payments.

    In general, procurement involves a range of tasks. These tasks are identifying potential suppliers, negotiating favorable terms, placing orders, inspecting and accepting goods, and maintaining a record of the process.

    The ultimate goal of procurement is to acquire quality goods and services in a strategic and ethical manner that aligns with the company’s objectives. This means obtaining high-quality supplies while keeping costs in mind.

    4 Types of Procurement

    Procurement is essential as it involves acquiring the necessary materials and resources to complete a project or fulfill customer orders. Generally, there are four types of procurement. These types are divided depending on what kind the procured items are and how those items are used.

    Direct Procurement

    Direct procurement involves acquiring the inputs necessary for a company to produce its end product, such as raw materials in the manufacturing industry. The cost and efficiency of direct procurement have a significant impact on a corporation’s profitability and performance. Especially if there are any delays in the direct procurement process, it can harm a company’s ability to create its goods.

    Indirect Procurement

    Indirect procurement involves acquiring services or inputs that are necessary for a company’s day-to-day operations but are not directly used in the production of its products. This can include items such as office supplies, furniture, advertising, consulting services, and equipment maintenance.

    Although these purchases may not contribute directly to the company’s bottom line, delays in indirect procurement can hinder the smooth running of the process. Therefore, it is important to manage indirect procurement effectively to ensure that the company can function efficiently.

    Goods Procurement

    Goods Procurement

    Goods procurement is the most prevalent type of procurement and involves the acquisition of tangible items, including software subscriptions. Effective procurement of goods often requires sound supply chain management practices, and both direct and indirect purchases may be included in the process.

    Services Procurement

    Services procurement refers to the process of obtaining people-based services, such as individual contractors, contingent labor, law firms, or on-site security services. This depends on the specific needs of the organization.

    This type of procurement can include both direct and indirect purchases, and its focus is on acquiring the necessary services to support the company’s operations.

    To ease the process of procurement you can utilize a comprehensive procurement system such as HashMicro, Click the banner below to discover the right pricing scheme that aligns with your organization’s needs.

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    download skema harga software erp

    How Procurement Works

    As the procurement meaning suggests, the procurement process involves identifying the company’s needs, finding suppliers, negotiating terms and costs, and purchasing and receiving goods or services. In larger companies, a team of specialists may handle procurement with input from different business groups.

    Procurement is an ongoing process. This is why building relationships with key suppliers is crucial for lower costs and higher profit margins. Therefore, regular quality checks and performance analyses are necessary.

    The procurement process varies between companies, and it is essential to evaluate and make changes for increased efficiency and goal achievement.

    Steps in the Procurement Process

    Undoubtedly, a systematic method within a corporation makes it easier for the company to get goods and services from suppliers. This will make it simpler for businesses to manage supplier relationships, select the best vendor, decide the necessary requirements in the appropriate number, examine acquired items, etc. Furthermore, the company’s efficiency will increase with competent management. So, here are the processes of it: 

    • Identifying requirements, such as what goods and services the company needs.
    • Submitting a purchase request, authorizing it, and also approving it.
    • Identifying and select vendors or suppliers
    • Negotiating price and terms
    • Making a purchase order and a receipt for goods
    • Receive and inspect the delivered goods
    • Managing shipments, receiving invoices and making the payment
    • Record keeping the entire process

    Why Procurement is Important in Business?

    Why Procurement is Important in Business

    Procurement plays a vital role in business. It helps businesses locate reliable suppliers who can provide competitively priced goods and services that meet their specific needs.

    By following the procurement process, companies can choose the best supplier that meets their requirements at a reasonable cost and avoid wasting time and resources with inadequate suppliers.

    In addition to minimizing costs, it is also essential to identify suppliers that can consistently deliver high-quality goods and services and have a track record of doing so. Therefore, optimizing procurement operations involves reducing costs while also selecting reliable suppliers that can meet the company’s needs.


    Procurement is an important step in understanding the supply chain. This can help companies find reliable suppliers who can deliver goods and services at competitive prices to meet their needs. The profitability of a corporation will be affected by good procurement. This can assist businesses in locating dependable suppliers that can match their objectives for delivering goods and services at affordable pricing.

    Managing procurement can be easily done with a system. HashMicro provides its procurement system for you, along with a free demo of the system and a Productivity Solutions Grant of up to 50%. For further information, you can kindly check HashMicro’s website and get a free demo now!


    FAQ About Procurement

    • Why is procurement important for businesses, especially in Singapore?

      Procurement is vital for businesses in Singapore and globally as it influences the timely acquisition of goods and services, ensuring competitiveness. In Singapore’s dynamic business environment, efficient procurement helps control costs, enhance transparency, and build reliable supplier relationships.

    What types of procurement does HashMicro’s system cater to?

    HashMicro’s procurement system is versatile and caters to various procurement needs. It covers:

    – Direct Procurement for acquiring inputs needed for end-product creation.
    – Indirect Procurement for day-to-day operational needs.
    – Goods Procurement for tangible items, including software subscriptions.
    – Services Procurement for obtaining people-based services, such as contractors or legal services.

    • How does HashMicro’s procurement system streamline the procurement process?

      HashMicro’s system streamlines procurement by automating manual tasks, reducing processing times, enhancing transparency, and providing real-time access to crucial information. It facilitates efficient supplier management, cost control, and compliance with procurement regulations.

    • How does HashMicro ensure data security in its procurement system?

      HashMicro prioritizes data security. The procurement system incorporates robust security measures, including encryption protocols and access controls, to safeguard sensitive procurement data. Regular updates and compliance with industry standards further ensure a secure environment.

    • Can HashMicro’s procurement system be customized for specific business needs?

      Yes, HashMicro’s procurement system is designed to be flexible and customizable. It can be tailored to meet the specific procurement requirements of businesses, ensuring a seamless fit with their processes and objectives.

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