What are the types of procurement?

The acquisition is the first stage in the supply chain. The main goal of the acquisition is to find suppliers that can provide goods or services at a competitive price. An investment can be executed in several ways:

  • Bidding on the goods or services to be acquired.
  • Contracting directly with a supplier.
  • Purchasing goods or services at a trade show.

 

Types of procurement methods include auctions, open markets, direct negotiation with suppliers, and trade shows. The acquisition process starts with identifying a need for goods or services. This can be done by either an internal or external customer. 

 

The next step in the acquisition/ procurement operation is to find suppliers that can provide these goods or services, called sourcing. Once suppliers are found, they are evaluated and ranked based on their ability to meet the company’s needs and its customers. The final step in the acquisition/ procurement process is to negotiate with suppliers for pricing, delivery terms, and other details needed for a successful transaction.

 

TYPES OF PROCUREMENT/ ACQUISITION

1) Internal acquisition: Internal procurement operation is buying goods and services for a company. It is a process that an individual or a team can do. The main goal of the internal acquisition is to make sure that the company has the necessary resources to operate efficiently. 

 

This includes ensuring that there are enough supplies, equipment, and other materials needed to complete tasks. The internal acquisition can be made in many different ways depending on the company’s size and what they need. 

 

For example, some companies use online marketplaces to buy their goods, while many others use a bidding system where they post what they need and then wait for bids from suppliers who want to sell them those items.

The growth of internal acquisition can be attributed to the following factors: 

  • The rise of globalization and international trade 
  • The increase in complexity of products 
  • The need to reduce costs 
  • The fragmentation of markets

 

2) External acquisition: External acquisition is buying goods and services from outside the company. It is common in many industries, including manufacturing, retail, and healthcare. The benefits of the external acquisition are that it can be more cost-effective because it has zero requirements to invest in infrastructure or equipment. It also allows companies to focus on their core competencies while outsourcing other tasks.

The growth of external acquisition can be attributed to several factors, including: 

  • The need for companies to focus on their core competencies and outsource other tasks that are not central to their business model 
  • The need for companies to reduce costs by outsourcing tasks that are not central to their business model 
  • The need for companies to increase efficiency by outsourcing tasks that are not central to their business model 
  • The need for companies to increase flexibility by outsourcing tasks that are not central to their business model 
  • The need for companies with global operations or supply chains, such as those in the retail industry, to outsource certain functions.

 

The growth of external acquisition can also be attributed to the changing nature of global business. As companies seek to become more efficient, they must find new ways of outsourcing tasks that are not central to their business. 

 

With the increased demand for a multi-site operation and an increasingly complex supply chain, it is no longer feasible for every company to have all the needed resources on site.

 

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