What is Procurement?

Procurement refers to the activities required to obtain goods and services from suppliers. It is needed to ensure that purchases are made at reasonable prices and from reputable suppliers. The most effective procurement process focuses on obtaining those goods and services that are in short supply, or which present opportunities for significant cost reductions. Conversely, the procurement function tends to offload the routine purchase of small-dollar items through the use of procurement cards, which is a more efficient process.

Steps in the Procurement Process

The standard procurement steps are as follows:

A department submits a purchase requisition for a specific item.
A purchasing agent locates several possible supplier candidates.
The purchasing agent selects the supplier having the best combination of price, quality, and delivery time, and may negotiate some terms of the purchase.
The purchasing agent issues a purchase order to the selected supplier.
The supplier delivers the item, which the receiving staff matches to the purchase order copy supplied by the purchasing agent.
The receiving staff delivers the received item to the department that originally requisitioned it.

What is Procure to Pay?

The procure to pay concept describes the entire process of defining what needs to be purchased, which suppliers to use, issuing purchase orders, and receiving goods. As such, the procure to pay concept encompasses not only all activities within the purchasing department, but also several ancillary tasks normally handled by other departments. These ancillary tasks include receiving (handled by the warehouse), stocking (also handled by the warehouse), and invoice processing and payment (handled by the accounting department).