A Guide to Improved Hospitality Procurement

Whether it’s a high-end steakhouse having Wagyu beef flown in from Japan, a hotel contracting with a linen service or a major league ballpark purchasing souvenir cups, the acquisition of goods and services is an essential function for all types of hospitality businesses. With strong procurement processes and systems in place, these companies are not only able to delight their guests, but they can also navigate common procurement pitfalls and protect their profits. This comprehensive guide explores the key aspects of hospitality procurement, from understanding the procurement process and navigating its challenges to implementing best practices and leveraging technology for success.

What Is Hospitality Procurement?

Hospitality procurement refers to the process of purchasing the products and services needed for the daily operations of a restaurant, hotel, venue, theme park or other hospitality-focused business. Strong hospitality procurement practices are essential for managing costs and cash flow, mitigating risks, nurturing supplier relationships and, ultimately, delivering a five-star guest experience.

Key Takeaways

• Hospitality procurement is about more than just buying the goods and services required for daily operations.
• Rather, it’s a strategic function that impacts a company’s cost structure, profitability and the guest experience.
• Hospitality companies face a host of procurement challenges, including dynamic pricing, supply chain volatility, sustainability expectations and quality-control issues.
• Developing robust procurement processes, investing in purpose-built technologies and embracing best practices are critical to managing and optimizing procurement.

Hospitality Procurement Explained

Hospitality procurement involves the purchase of a wide variety of goods and services essential to the daily operations of businesses like hotels, restaurants, event venues and travel companies. It is a strategic process that requires careful planning, relationship building and ongoing management to ensure the right goods and services are obtained at the right price, quality and time.

Some of the key categories of purchases that hospitality businesses typically procure include food and beverages; towels and linens; cleaning supplies and equipment; housekeeping, maintenance and security services; furniture and fixtures and equipment; office supplies and equipment; and transportation and logistics services.

A well-run procurement function involves a range of responsibilities, including sourcing and vetting vendors, negotiating contracts, managing inventory, processing invoices and nurturing supplier partnerships. In addition to having skilled procurement professionals and effective processes in place, a well-run procurement function requires another critical component: procurement technology. Hospitality businesses often manage a high volume of frequent purchases and a large supplier base, which can be overwhelming when handled manually. But with the right technology in place, hospitality companies are able to streamline their processes, increase their efficiency and lower their costs, which, in turn, can drive greater profitability.

Hospitality Procurement Challenges

Like many other industries, the hospitality sector faces a range of procurement challenges that can significantly impact companies’ financial performance and operational efficiency. Identifying and having a plan in place to navigate around these possible roadblocks is crucial for minimizing disruptions to the procurement process and driving long-term success. So is investing in a solution that integrates procurement, supply chain management, relationship management, accounting, advanced analytics and other business-critical functions.

Here are six of the most prevalent procurement challenges in the hospitality industry.

• Supply chain volatility: The impact of supply chain disruptions on businesses of all stripes has become abundantly clear over the past few years. Whether due to macro issues, such as the pandemic, geopolitical turmoil or natural disasters, or problems that arise with a specific vendor or product, supply chain volatility can impede a company’s ability to operate smoothly and meet customer demand.

  The hospitality industry can be especially sensitive to supply chain issues. Many businesses in this space work with perishable goods, for example, so stockpiling inventory to head off possible shortages sometimes leads to spoilage and waste. Pricing volatility as a result of supply chain constraints, such as a shortage of key ingredients, can also hit hospitality companies — and their ability to turn a profit — especially hard. In addition, hospitality firms that rely on a small number of specialty vendors find themselves more vulnerable if one of them fails to deliver.

• Quality control: Providing a repeatable guest experience is the hallmark of a good hospitality company, impacting customer satisfaction and loyalty, brand image and competitive stance. The ability to achieve this depends, in part, on the consistency of procured products and services. Maintaining quality control — whether over the variety of easily bruised fruits and vegetables a restaurant relies on or the outsourced security services needed at a concert arena — is crucial, yet challenging. Thus, it’s essential for hospitality firms to develop and manage product and service standards for all of their suppliers, which means establishing service-level agreements and other contractual clauses, good vendor management and regular quality-control reviews.


• Cost management: For hospitality companies like hotels, spas, restaurants and resorts, cost management is an existential necessity. It’s no small order. Procurement professionals must anticipate and manage the costs of everything from labor and food to rent and construction projects.

  Creating and sticking to a budget is critical in hospitality, where cash flow and budgets are usually tight. In addition, cost variations and increases are quite common in the industry and can impact purchasing power, profitability and competitive stance. Unexpected circumstances, such as one of the supply chain disruptions mentioned above, might also arise, resulting in sudden price upticks. But whatever the reason, if the business has to pass on the inflated costs to its guests, customer satisfaction and sales could take a hit.

  Following strong cost management practices can help hospitality companies stay within their budgets. Some common techniques for managing costs include activity-based costing (ABC) and cost analyses to highlight areas of overspending, rising costs or opportunities to scrutinize purchasing.

• Vendor management: Vendors can have an outsized impact on the hospitality guest experience — consider the importance of an outsourced housekeeping service, a produce supplier or the manufacturer of customer-facing technology, such as a booking engine or check-in kiosk. Issues with these products or their performance will reflect poorly on the hospitality company. Thus, vendor management is critical, but it is also challenging because of the significant number and range of vendors that hospitality firms work with to run their businesses.

  The goal is to create strong — and mutually beneficial — relationships with vendors so that they are incentivized to perform well. Good vendor management begins with selecting vendors with which a hospitality company can create trusted partnerships. Frequent and effective communication at the right levels is also key. Another vendor management best practice is to focus on those that provide the most critical or valued goods or services to the business.

• Technological integration: Visibility into all procurement activities across a hospitality company is necessary to effectively manage and optimize spending, inventory management and more. But that’s difficult to achieve when dealing with siloed legacy systems, shadow or rogue procurement involving unauthorized purchases, or manual procurement processes. It’s also why an enterprise resource planning (ERP) system — with robust procurement, inventory management and financial management capabilities that are inherently integrated — can be a valuable investment. ERP allows for the seamless exchange of data across these connected functions, fostering greater collaboration and communication and ensuring that everyone is working from the same accurate source of information.


• Sustainability and ethical sourcing: Sustainability was a priority for 92% of respondents in a 2023 Global Business Travel Association survey. And it’s no wonder: Businesses of all kinds are under increasing pressure from their customers, communities, investors and regulators to embrace eco-friendly practices and more ethical sourcing.

  For hotels, this might involve greater use of eco-friendly products, energy-efficient solutions or services, and reuse and recycling policies. For restaurants, it might come in the form of food-waste reduction initiatives or forging partnerships with sustainable farms and local suppliers, thereby reducing the environmental impact from shipping and logistics.

  Increasing sustainability efforts and choosing to source from suppliers that engage in ethical and eco-friendly practices can also help hospitality companies reduce their own environmental footprints, better support the communities in which they operate and burnish their brand reputation in the marketplace. But accomplishing this isn’t necessarily straightforward. Procurement professionals may need to look beyond the most obvious sourcing choices to locate suppliers with ethical and eco-conscious practices and products, as well as seek out local suppliers and regularly monitor or audit their own and their suppliers’ products and practices.

The Hospitality Procurement Process

Few aspects of the hospitality experience are not touched, in some way, by procured goods and services. The financial stability and profitability of the hospitality firm also depend on how well its procurement professionals balance the cost and quality of purchases made. Then there is the way a hospitality business’s procurement practices reflect on its brand, particularly with regard to sustainability and ethical sources practices.

In recognition of the importance of procurement to hospitality, it becomes crucial to understand the components of an effective process. Here’s a hint: The process involves more than just the actual purchase of goods or services. While each hospitality business may have its own specific approaches and standards for procurement, a few steps tend to be universal.

1. Needs Assessment

Before anyone starts exploring vendors or makes any buying decisions, an analysis of the business’s actual needs must take place. Perhaps a hotel wants to install kiosks for contactless guest check-ins, or maybe a conference center needs to replace its technology with modern audio-visual equipment. During the needs assessment stage, the hospitality company hoping to make such improvements should define its procurement requirements as specifically as possible. At this stage, the business may not even have a specific product in mind; it might just have a business problem it’s trying to solve. Or, rather than seeking out a product or service, its goal might be to diversify its supplier base.

2. Supplier Selection

Once the needs of the business are clear, the procurement process proceeds with a search for the best suppliers to meet those requirements. What “best” means will be revealed by the needs assessment, as well. The company may be looking for a certain price point or reliability guarantees. It may want a vendor with which it can form a more strategic partnership to overcome some historical supply chain issues. Often, it will be a mix of all of these factors. Suffice it to say, thorough market research and dedicated due diligence are in order for proper supplier evaluation.

The supplier selection phase often involves a request for bids, quotes or proposals. Vendors outline their pricing, terms and conditions, enabling the hospitality procurement team and stakeholders to form a clear idea of their choices so they can make apples-to-apples comparisons before making their selection.

Many hospitality companies find it valuable to establish long-term, trusted relationships with their suppliers — particularly those that provide critical goods and services — to create a level of stability in terms of quality, cost and services. While much purchasing takes place digitally today, talking to the vendors themselves, as well as their customer references, is always worth a procurement professional’s time.

3. Purchasing

Supplier selection helps a hospitality company pick the ones most aligned with its requirements and budget. Certain purchases might also require a contract, such as for maintenance or software services. It’s important that the contract’s terms and conditions — pricing, delivery schedules, payment terms, quality control processes, termination rights and the like — make sense for all parties. A well-negotiated contract avoids the pitfalls that happen when a business pushes for so many concessions that its supplier is unable to provide goods and services profitably, which could come back to haunt the hospitality company in the form of increased supplier prices.

Once a contract or a standard agreement is signed on the dotted line, a purchase can be made. Establishing a standard process for issuing purchase orders helps prevent rogue or unauthorized buying and ensures that the procurement team has the visibility required to best manage and optimize company spending.

4. Logistics Management

Logistics management is an essential aspect of hospitality procurement, but it can be trying since these businesses often contend with perishable products, high-volume orders, last-minute needs and many different suppliers. Logistics management includes oversight of the flow of goods and services to and within the business, efficient inventory storage and warehousing, and freight and transportation budgeting and analysis. Effective logistics management not only promotes on-time delivery, but it can also help prevent stockouts or overstocking, ensure product freshness and quality, reduce costs, minimize waste and heighten the guest experience.

5. Payment Processing

Timely payments are essential for maintaining strong supplier relationships and ensuring a steady flow of goods and services. For hospitality companies, issuing payments promptly is important, but so is ensuring that their invoices reflect the goods purchased and received. This verification process, known as three-way matching, involves comparing the invoice, purchase order and receiving report to identify any discrepancies or errors. Automating this process can help hospitality companies quickly flag and resolve issues, preventing overpayments or disputes with suppliers. Indeed, given the high volume of suppliers and purchases that hospitality companies typically manage, integrating and automating procurement and accounting/accounts payable processes can significantly streamline operations and reduce the risk of errors.

6. Quality Control

Quality control is the method for determining whether procured goods or services meet the hospitality company’s standards. It is typically accomplished through quality-control testing. But just as important as identifying quality issues is having clear processes in place for how to handle them. Thus, it’s essential for hospitality firms to develop and manage product and service standards with their suppliers through service-level agreements and other contractual clauses, good vendor management and regular quality-control reviews. The steps for remediations should also be clearly understood by those involved in procurement and quality-control functions.

7. Relationship Management

Solid contract terms are one way hospitality companies can establish beneficial pricing, good quality products and services, and increased responsiveness from suppliers. Another valuable way is to consciously build and maintain strong relationships with them. There are many facets of supplier relationship management, including creating open lines of communications, facilitating collaboration, monitoring performance and creating plans for improvement. By investing the time and effort into cultivating positive supplier partnerships, hospitality businesses could, in turn, capitalize on several potential advantages that extend beyond the terms of a contract, such as cost savings, improved responsiveness, higher-quality offerings, enhanced risk mitigation and access to valuable supplier expertise and insights.

8. Technology and Systems

Investing in technology and related systems allows hospitality companies to maximize the effectiveness of each step in the procurement process. Purpose-built software that digitizes, automates and streamlines procurement tasks improves the accuracy and efficiency of procurement management. Many procurement teams already recognize the benefits of greater digitization and automation, with purchasing departments on track to achieve a 70% rate of digitized processes by 2027, according to PwC’s 2024 Digital Procurement Survey.

Ideally, a hospitality company will consider investing in an enterprise suite of software that includes not only procurement-specific functionality but also integrated capabilities related to supply chain management, demand forecasting, price forecasting, inventory management and more. Modern ERP software can empower hospitality leaders and procurement professionals to make more data-informed decisions that save money, better track inventory, improve supplier management, mitigate supply chain risks and more.

9. Continuous Improvement

The hospitality industry is always changing to meet the evolving demands of customers and other market shifts. That means procurement processes must continually adapt as well. The most mature procurement functions constantly monitor, analyze and benchmark their performance to identify areas for improvement and then integrate necessary changes into their processes going forward. They also track industry trends, follow new supplier offerings and keep abreast of tech innovations to determine which ones make sense to implement in their organizations. In all of these ways, hospitality companies can continue to reduce costs, increase efficiency and improve their procurement performance over time.

Key Considerations in Hospitality Procurement

From managing costs and maintaining quality to streamlining processes and mitigating risks, procurement professionals must consider a variety of factors that contribute to the success of their discipline. Here is a closer look at these and a few other important considerations in hospitality procurement.

Cost Management

As it is for any business, cost is a primary consideration in hospitality. The less a company has to spend on its purchases, the more likely it will be able to invest in other key areas of the business, like the guest experience or upgrades in facilities. However, cost management isn’t just about getting the lowest price possible (especially if it comes at the expense of quality). Rather, the focus should be on strategic cost management practices, like savvy contract negotiations, procurement process optimization and smart sourcing.

Quality Assurance

Getting back to the just-mentioned point about quality, the quality of the goods and services a hospitality company procures has a direct impact on the guest experience and its brand reputation. Whether it’s the equipment in a hotel gym or the wines a restaurant offers as part of its beverage program, sourcing high-quality products and services that align with the company’s standards is essential — which is why establishing and maintaining a rigorous quality-assurance program is paramount. Investing in quality assurance has other benefits as well, including minimizing risk, increasing operational efficiency, controlling costs and complying with regulations.

Supplier Relationships

Supplier relationships are the beating heart of procurement. The stronger the ties between a hospitality company and its vendors, the more likely the hospitality company is to enjoy lower prices, increased quality and service, and the opportunity to collaborate and innovate on hospitality products and services. In addition, suppliers are more likely to work alongside the hospitality company amid marketplace challenges and supply chain disruptions.

Since hospitality firms often work with a multitude of vendors — supplier diversity is always a smart strategy — effectively managing these relationships involves identifying the ones of most strategic importance based on what they provide, the availability of alternatives and overall capabilities. Procurement or supplier relationship management professionals can then focus their efforts on the most critical partners.

Efficiency

Efficiency and cost management go hand in hand. But efficiency also has an impact on speed, which is especially important in the hospitality field, given the types of goods and services procured, the changing nature of the marketplace and evolving guest preferences. For the procurement function to serve as a strategic department in meeting the company’s overall goals, it needs to be able to contribute to timely, data-informed decisions and bring up-to-date visibility into overall spending. The ability to operate at this level demands streamlined and reliable procurement processes conducted via enterprise technology systems.

Sustainability

Today’s consumers — especially millennials and Generation Z, whose purchasing power is expected to surpass that of older generations in 2030, per McKinsey — want to know that the companies they patronize follow environmentally and socially conscious practices. Thus, sustainability and ethical sourcing should be priorities for hospitality procurement professionals. Purchasing products that are manufactured with these factors in mind and working with suppliers and vendors that also prioritize these matters in operations are the primary ways in which procurement professionals can incorporate greater sustainability into their spending.

Risk Management

Managing risks — related to quality issues, supplier disruptions, marketplace shifts and more — is important in any procurement process. Risk management ensures that the hospitality company is able to maintain day-to-day operations, keep costs in check and deliver the best guest experience possible, no matter what comes its way. As such, risk management requires a proactive approach, incorporating risk mitigation into every step of the procurement process. Some common practices include assessing vendor risk, diversifying the supplier pool and devising contingency plans that address the possibilities of supplier shortages, demand spikes, geopolitical conflicts, pandemics, natural disasters and other unforeseen circumstances.

Regulatory Compliance

Compliance is a critical, and complex, consideration in hospitality, where businesses have to abide by everything from food and health safety laws to labor and employment regulations to data privacy and security laws. The regulatory environment is also ever-evolving, underscoring why it’s so important for businesses to keep up or else incur potential fines, penalties and other liabilities, including reputational damage. Building compliance measures into supplier contracts and continually monitoring for potential noncompliance — another area where software can assist — is highly recommended, as is working closely with the legal and compliance teams.

Best Practices for Effective Procurement in Hospitality

Procurement decisions can have a significant impact on both the guest experience and a business’s bottom line. Excelling in hospitality procurement means working through the process outlined above, as well as employing the following best practices.

Source Strategically

A supplier issue or supply chain disruption can have a profound effect on hospitality operations and the guest experience. While contingency and incident-response plans are solid ways to deal with these issues after they occur, strategic sourcing can offer a more proactive approach to maintaining a steady supply of the goods and services. Common approaches include working with local suppliers, thereby reducing lead times and limiting the logistics involved; diversifying the supplier base to spread out the risk and create more options should a supplier experience an issue; and evaluating supplier risks as part of the selection process — assessing, for example, candidates’ ability to withstand a natural disaster or their proximity to geopolitical risks.

Leverage Technology

Managing procurement manually increases the likelihood of errors, duplicated purchases and lack of transparency into spending across a hospitality company. Investing in technology systems to digitize and automate procurement processes offers some of the biggest returns on investment in terms of increased efficiency, reduced costs and procurement optimization. Procurement leaders seem to recognize this, according to Deloitte’s 2023 Global Chief Procurement Officer Survey, which cites digital transformation as the No. 2 procurement strategy, behind supplier collaboration.

Cloud-based enterprise software with integrated capabilities for procurement management offers hospitality firms comprehensive, real-time visibility into all aspects of the process, promoting data-driven decisions that improve procurement over time. Hospitality procurement professionals also apply data analytics to perform price or demand forecasting, supplier risk management, procurement performance management and other tasks.

Standardize Products and Consolidate Purchases

Implementing frameworks for procurement decision-making ensures greater consistency across all purchasing decisions. Standardizing products involves establishing consistent specifications and requirements for the goods and services purchased. This can include everything from the type and quality of linens used in guest rooms to the ingredients used in restaurant dishes. And by consolidating purchases, hospitality companies can achieve greater cost savings and economies of scale, as well as reduce transportation and logistics costs.

The procurement function should make product-purchasing standards clear to everyone in the organization. Businesses that invest in enterprise procurement technology and tools are in the best position to see the spending taking place across the organization, consolidate purchasing and take advantage of associated cost savings.

Adopt Just-in-Time (JIT) Practices

One way to trim procurement expenses and potentially cut inventory carrying costs is to adopt “just-in-time” (JIT) inventory management. The idea with JIT is for a company to have on hand only the minimum amount of inventory it needs to meet customer demand. In hospitality companies that deal in perishable goods, this is a particularly effective approach for maintaining product quality and reducing waste. It also requires that hospitality companies have solid demand management practices and analytics in place because it leaves little room for error. For example, if a hospitality company were to encounter an unexpected supply chain disruption or a sudden increase in demand, it could find itself without the goods it needs to operate.

Focus on Sustainability

Investing in sustainable procurement practices is not only a matter of meeting the expectations of environmentally conscious guests, investors and regulators, but it also benefits the hospitality business itself. By working with suppliers that embrace sustainable and socially responsible practices and by purchasing products with a limited ecological or social impact, procurement professionals can help the organization meet its sustainability and corporate responsibility goals while adding long-term business value.

One key benefit of sustainable procurement is cost savings. For example, by conserving energy and water, hospitality businesses can lower their operating costs and improve their bottom line. Similarly, purchasing products with minimal packaging or that are made from recycled materials can help to reduce waste disposal costs.

Hone Negotiation Skills

Strong negotiation skills are critical not only for controlling costs but also to ensure that supplier relationships align with business requirements. Note: This does not mean strong-arming vendors or aiming for the lowest possible price. Rather, it calls for a collaborative process that seeks to identify win-wins, particularly with the hospitality organization’s most important suppliers. Negotiations should focus on prices, of course, as well as on quality-control efforts, delivery schedules, payment terms, communication and collaboration approaches, and remedies for when things go awry. The better a procurement team’s negotiation skills, the more likely they are to foster healthy, long-term relationships with their suppliers.

Focus on Regulatory Compliance and Risk Management

Hospitality procurement leaders should work closely with their legal counsel and any regulatory advisers on developing robust processes that incorporate appropriate compliance checks and due diligence measures. By integrating these processes into the procurement workflow, businesses can ensure that their suppliers and contractors do not introduce additional legal or financial exposure. Procurement teams must stay informed about changes to relevant laws, codes and standards, and adapt their processes accordingly. Regular audits and ongoing communication with suppliers is also key to mitigating compliance risks and taking corrective action before they become major liabilities.

Invest in Training and Development

Everyone involved in procurement — those who are part of the team, as well as anyone making purchasing decisions and leaders with an interest in procurement performance — must understand how procurement works. Providing training and development keeps all players on the same page. Programs should educate about procurement processes, tools, data and expectations. They can also include specific aspects of procurement, such as how to reduce wasteful spending, what products or suppliers are approved for purchase or how best to manage inventory. Making training easily accessible and digestible for busy staff and leaders is also recommended.

Create Feedback Loops

Hospitality procurement teams must continually evolve if they are to keep costs low, quality high and processes responsive to changing business needs. Creating data-driven feedback loops, in which past performance is used to guide future procurement strategies and decisions, and tracking key performance indicators related to both supplier performance (e.g., product quality, on-time delivery) and procurement effectiveness can drive ongoing improvement. This requires having robust systems in place for collecting, analyzing and acting on performance data.

Control Spending, Automate and Manage Suppliers With NetSuite Procurement

Investing in purpose-built technology helps hospitality procurement teams automate their processes, increase purchasing visibility, control costs, identify errors and inconsistencies, and better manage vendor relationships. NetSuite Procurement offers a well-rounded suite of features to manage and optimize hospitality procurement. Source management capabilities make sure that companies purchase from suppliers that are capable of meeting desired quantities and prices. Purchase management functionality offers visualizations of orders and when they will be received, easing inventory management. Vendor management capabilities centralize relationship management processes and enable real-time communication via a vendor portal. Invoice processing tools automate order receipts, bill processing and payment planning, and incorporate three-way matching technology to spot variances among purchases orders, receiving records and bills. In addition, all procurement data can be consolidated in a procurement dashboard, which provides a snapshot view of everything from vendor performance to expenditures by department.

Together, these features help ensure that hospitality procurement departments are well equipped to overcome some of their most common challenges, including poor supplier communication, unnecessary spending, vendor performance issues and supplier compliance with regulations and company standards.

The procurement function in hospitality plays a strategic role, not only making sure that the business has the products and services it needs but also helping it control its costs, achieve its sustainability goals, meet compliance requirements, manage associated risks and maintain the desired guest experience. Understanding the key aspects of the procurement process, the most common challenges likely to be encountered and investing in best practices and technology systems is critical to streamlining and optimizing the function and maintaining the agility necessary to meet changing guest demands and marketplace conditions.

Hospitality Procurement FAQs

What role does quality control play in procurement?

Quality control ensures that purchased goods or services meet the purchasing company’s standards, that the company is getting what it paid for and that the quality of its own goods and services are at appropriate levels. Companies can institute their own quality-assurance measures to maintain this control, including regular testing and audits, clear processes for what should be done when issues are uncovered and contractual clauses within supplier contracts that cover remediation expectations.

How often should procurement contracts be reviewed or renegotiated?

While it might be tempting to file away supplier contracts once they are signed, it’s a best practice to regularly review and/or renegotiate these contracts to be sure that pricing and other terms reflect current marketplace dynamics and changing company needs. In fact, most procurement contracts should be reviewed annually to assess how suppliers are performing against their obligations. As for renegotiation, that will depend on the contract’s terms. Most supplier contracts stipulate that they can be renegotiated within a certain period of time before the end of the term (e.g., 30, 60 or 90 days). But there may also be circumstances in which the purchasing company will want to renegotiate sooner — say, due to changing economic conditions or in light of vendor performance issues.

What impact do global events have on hospitality procurement strategies?

One need not look too far back in history for a vivid example of the impact of a global event on hospitality procurement. The COVID-19 pandemic caused rapid and successive shifts in supply and demand, impacting hospitality companies. While many suddenly saw a drop-off in business, and thus their need to purchase goods and services, others (like restaurants) had to shift to new takeout models and had to purchase new types of goods and services, such as takeout containers or temporary delivery personnel. In addition, supply chain disruptions impacted the availability of critical goods, like paper products and certain food items.

What are the 3 main types of procurement?

Three types of procurement are direct procurement, indirect procurement and services procurement. Direct procurement is the purchase of goods that are used directly in providing the goods or services that a company sells. Indirect procurement involves the purchase of other goods that don’t directly go into the company’s products or services — think: phones or office supplies — but are necessary for day-to-day business operations. Services procurement refers to non-goods-based purchases, like hiring third-party consultants or contracting with a public cloud provider.

What are the 7 stages of procurement?

The number of steps involved in the procurement process will vary by company, but there are seven stages common to most organizations. First is needs assessment, followed by supplier identification and assessment. Then it’s time to negotiate a contract with the chosen supplier, after which the company can issue the purchase order. Then the order is fulfilled. At that time, it’s important to perform quality control. Finally, there is the regular review of supplier performance to identify areas in need of improvement and to implement changes.

What are 3 examples of procurement?

One example of procurement is the direct purchase of goods that are necessary for a company to offer its own goods or services. For example, a juice bar must procure fresh fruits and vegetables, protein powders, cups and straws to make its juices and smoothies. Another example of procurement is the purchase of enterprise software or cloud services required for the day-to-day operations of a company. A hotel chain, for example, might procure enterprise resource management (ERP) software to run its business. Finally, a company may need to procure certain services — say, contracting with a professional accounting firm to manage its books or bringing on seasonal employees to meet shifts in demand.

What are the 7 activities involved in procurement?

Procurement involves much more than just purchasing a product, though that’s certainly one of the primary activities involved. Six others are assessing the company’s needs, evaluating suppliers, negotiating contracts, managing logistics, performing quality-assurance checks on goods and services, and managing supplier relationships.