Sourcing and Procurement

Procurement generally involves making buying decisions under conditions of scarcity.

If good data is available, it is good practice to make use of economic analysis methods such as cost-benefit analysis or cost-utility analysis.

Procurement activities are often split into two distinct categories, direct and indirect spend. Direct spend refers to the production-related procurement that encompasses all items that are part of finished products, such as raw material, components and parts. Direct procurement, which is the focus in supply chain management, directly affects the production process of manufacturing firms. In contrast.

Indirect procurement concerns non-production-related acquisition: obtaining “operating resources” which a company purchases to enable its operations. Indirect procurement comprises a wide variety of goods and services, from standardized items like office supplies and machine lubricants to complex and costly products and services like heavy equipment, consulting services, and outsourcing services.