Procurement Guide 2025: Types of Procurement, Process Steps, and Key Strategies for Cost & Supplier Management

In this article, we’ll cover the types of procurement, the traditional procurement process, agile procurement approaches, and four key strategies that drive value — from cost reduction to supplier relationship management.

 

What is Procurement?

Procurement can be broadly divided into direct and indirect procurement:

 

1. Indirect Procurement

Indirect procurement includes goods and services that support your business operations but do not go directly into your end product. Examples include:

✔ Office equipment (computers, laptops, printers)

✔ Stationery and office supplies

✔ IT systems for staff

✔ Facility management and office rental

*These items ensure employees can perform efficiently and contribute to overall business productivity.

 

2. Direct Procurement

Direct procurement refers to sourcing materials, components, or services that are integral to your final product. Examples include:

◆ Components inside a washing machine (computer chips, concrete blocks, sensors)

◆ Complex systems like aerospace electronics (antennas, heat management systems, computer boards)

Direct procurement has a direct impact on product quality and customer satisfaction, making it a critical part of manufacturing and production.

 

The Procurement Process

The procurement process typically follows several sequential phases:

 

Step 1: Identify the Need

A business identifies what it requires to operate or achieve a specific objective. Documenting this need is essential.

 

Step 2: Define Specifications

Once the need is clear, define detailed specifications:

Functional requirements (e.g., antenna power output, dimensions)

Performance criteria

Space, weight, or capacity limitations

Step 3: Supplier Engagement

Engage suppliers through Request for Information (RFI), Request for Proposal (RFP), or Request for Quotation (RFQ) to understand capabilities and pricing.

 

Step 4: Evaluate and Select Suppliers

Evaluate supplier responses and select the supplier(s) that best meet your requirements.

 

Step 5: Contract Negotiation

Negotiate terms, including:

★ Price

★ Delivery timelines

★ Quality and service level agreements

 

Step 6: Order Placement and Delivery

Place the order, monitor production or service delivery, and ensure items match agreed specifications.

 

Step 7: Inspection and Payment

Inspect goods or review services for quality and compliance before processing payment.

 

At Darkhorse Sourcing, we often combine this traditional sequential approach with agile procurement, especially for fast-moving industries like fintech or software. Agile procurement allows parallel supplier engagement, multiple proofs of concept, and ongoing contract management for better performance outcomes.

 

Effective procurement drives business value. Four strategies stand out:

 

1. Cost Reduction and Control

Focus on securing the best price and maintaining cost stability. Cost-efficient procurement increases profitability and ensures long-term financial sustainability.

 

2. Quality Improvement

Prioritize high-quality goods and services, balancing cost efficiency with performance and durability. High-quality procurement reduces defects and improves end-user satisfaction.

 

3. Supplier Relationship Management (SRM)

Treat key suppliers as strategic partners. Collaborate to innovate, reduce costs, and create mutual value. Strong supplier relationships lead to better performance and long-term benefits.

 

4. Risk Management

Identify, mitigate, and prevent supply chain risks that could disrupt operations. Proactive risk management ensures business continuity and minimizes exposure to delays, quality issues, or financial losses.

Combining these strategies maximizes the value of procurement, reduces costs, and supports business growth. Poorly executed procurement diminishes value and may hinder operational success.

 

Procurement is far more than a transactional activity — it is a strategic business function that drives cost efficiency, quality improvement, risk reduction, and strong supplier partnerships. Done right, procurement creates measurable value for your company.

 

At Darkhorse Sourcing, we help businesses manage their procurement processes end-to-end: from supplier identification and sample evaluation to contract negotiation, risk management, and supplier relationship development. Our expertise ensures your procurement is cost-effective, high-quality, and aligned with your strategic goals.

 

For businesses looking to optimize procurement, streamline supplier selection, or reduce costs without compromising quality, Darkhorse Sourcing is your trusted partner in global sourcing.