What is a Procurement Service?

A procurement service is an independent firm that specializes in providing dedicated procurement support to organizations, large and small. Procurement or purchasing is the sourcing of goods and services for use in a business environment. Most large firms have a dedicated procurement department, staffed with procurement officers and buyers. The purpose of a procurement service or department is the same, to obtain the best possible combination of price, service, and quality for the organization.

Most procurement services focus on a specific aspect of procurement. For example, an electronic procurement firm will have a complete software package that the firm will operate and manage on behalf of the client. The client will receive orders from customers and submit invoices to the procurement service. All the transactions in between, management, support of the technology, and the creation of business processes, is the responsibility of the procurement service.

There are two common types of traditional procurement services: strategic sourcing and purchase order management. Strategic sourcing refers to the process of issuing and managing bids, quotations, requests for proposals, tender management, and related processes. This type of procurement service is usually billed on a per project basis, as the type of staff and time required will vary by project.

A purchase order management service is responsible for performing the primary function of a buyer within the organization. The service receives requests from staff for specific materials. The firm then reviews the existing contracts, identifies a suitable supplier, confirms the price and delivery is acceptable to the client, and places the order. The purpose of this type of service is to reduce the overhead costs for small to medium size firms that do not have sufficient volume of purchasing activity to justify a full-time buyer, but would like to capture the cost savings associated with a more formal procurement process.

The use of a procurement service is often seen by staff as outsourcing of essential functions and administration jobs. From a business perspective, the savings a professional service can achieve far exceeds the cost. In addition, the service is completely independent of the firm and would have no bias or preference for a specific supplier or firm.

When looking for a procurement service, it is best to ask for references. Take the time to check the details and talk with the professionals about their experience, the issue resolution process, and billing procedures. Many procurement service firms bill based on a portion of the dollars saved. Find out how this is calculated in advance to make sure you understand the implications of this valuation method.