Linking Procurement and Business

If you are a business owner, you have probably heard of procurement. You might even consider procurement as one method to increase your business’ profit and expand your business horizons . Before you decide to jump into the procurement bandwagon, stop and ask yourself some procurement-related questions.

1. What is Procurement?

Procurement can be summed up as the process of acquiring a business need, which is provided by a third party or another business. Every business needs a particular good or service and there is another business that can provide it. Since businesses cannot have all the resources (good or service) it needs, it has to rely on a third party. In addition, the process of acquiring a need can be hampered by other factors such as time or cost constraints. The whole activity of acquiring goods and services (plus a host of other sub-activities) is essential to any business.

2. Who participates in Procurement?

There are two parties involved in procurement: the seller (also called vendor) and the buyer (often referred as the client). The role of each party is well-defined. Any kind of entity can assume the role of seller or buyer. Sometimes, entities can assume both, but never in the same occasion. If you are running a private business, you can sell to other businesses (same size or larger) or to the government. Selling to other companies (often larger ones) is called corporate procurement while selling to the government is called public or government procurement. In public procurement, procurement can also be identified by the level of government that engages with your business – it can be a local, state or federal government. Differences between corporate and public procurement are very little but not taking note of them might be costly for your business.

3. Why is Procurement Important?

As stated earlier, a buyer (or client) needs something to run its business or services efficiently. On the other hand, a business with that specific need needs to earn profit from what it can produce. In simple terms, procurement is a means or exchange or barter between these two entities. The buyer gets the good/service they need and the seller earns profit from delivering the said need. Procurement keeps both firms in business. In a much larger scope, procurement contributes to the economy (in local, state and federal level). Some business owners also feel that procurement is a way to serve their country and fellow countrymen.

4. Is it too late for Procurement for my Business?

The simple answer is no. Any business can learn and participate in procurement process. Procurement can be a big help and a good option for many business which are disadvantaged or in need of a steady and continuous profit. For disadvantaged businesses (minority-owned, women owned, veteran owned and others) a government agency called the Small Business Administration (or SBA) was established by law to help them using the procurement process.

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