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What is Procurement #procurement #supplychainmanagement
What is Procurement? #procurement #supplychainmanagement
Procurement is one of the most important components to understand when thinking about supply chains. In essence, procurement is the way that you purchase or acquire raw materials and other critical items needed to run your organization. This field can be broadly categorized into two major types: direct procurement and indirect procurement.
Direct Procurement
Direct procurement is the acquisition of raw materials that will be used in producing a finished product. This could also include the procurement of semi-finished goods or any work-in-progress items that undergo further assembly within your operations. For distribution companies or retailers, direct procurement could involve buying finished goods. Essentially, anything directly related to the production of a product or service falls under direct procurement.
Indirect Procurement
Indirect procurement involves acquiring items that are not critical or directly related to your finished goods. Examples include office supplies or other materials crucial for the daily operations of your business, but not directly tied to the production process.
Keyword
- Procurement
- Supply Chains
- Direct Procurement
- Indirect Procurement
- Raw Materials
- Semi-Finished Goods
- Finished Goods
- Distribution Company
- Retailer
- Operations
- Office Supplies
FAQ
Q1: What is procurement?
A1: Procurement is the process of purchasing or acquiring raw materials and other critical items needed to run an organization.
Q2: What are the two major types of procurement?
A2: The two major types of procurement are direct procurement and indirect procurement.
Q3: What is direct procurement?
A3: Direct procurement involves acquiring raw materials, semi-finished goods, or finished goods that are directly related to producing a finished product.
Q4: What is indirect procurement?
A4: Indirect procurement involves acquiring items that are not directly related to the production of finished goods but are necessary for the daily operations of the business, such as office supplies.