11 min read
Ask five procurement teams to draw their process and you will get five different diagrams, each with a different number of boxes and strategic priorities. I have argued on the Art of Procurement podcast for years that this variety is healthy, because a process should fit the organization that runs it, butt does make the basic question harder to answer than it should be.
The procurement process is the sequence of steps an organization follows to turn a business need into a contracted supplier, a delivered good or service, and a paid invoice. Most frameworks describe seven stages to the procurement process, from identifying the need through managing the supplier. The exact count depends on what is being bought and how much of the work procurement owns.
Key takeaways:
- The procurement process runs from identifying a need to paying the supplier and managing their performance, and most frameworks describe it in seven stages.
- Published frameworks list anywhere from 7 to 13 steps because they start and stop at different points. The activities in the middle are largely the same.
- Source-to-contract is the strategic front half of the process and procure-to-pay is the transactional back half. Source-to-pay spans both.
- A modern alternative to an N-step procurement process is the Procurement, Inc flywheel. You’ll find out what it is at the end of this article.
What is the procurement process?
The procurement process is the end-to-end set of activities an organization uses to acquire goods and services from outside suppliers. It starts when someone in the business identifies a need and ends when the supplier has been paid and their performance reviewed. It covers both the strategic work of choosing suppliers and the transactional work of ordering and paying for what was agreed.
That transactional part is what many people call purchasing. Procurement adds the upstream work of sourcing and negotiating, plus the supplier management that continues after payment. Liem Hua, then Global Head of Strategic Sourcing at Hopin, described the distinction during an AOP Live session.
“There will always be POs, there will always be transactional things that happen in that cycle. But there’s this other upstream portion that’s been ignored for a long time for a lot of different companies.”
Liem Hua, Global Head of Strategic Sourcing, Hopin, speaking in 2021 (Art of Procurement, Improving Internal Perception of Procurement from Intake to Procure)
Liem went on to call the upstream work a complement to the transactions. A well-designed procurement process gives both halves a clear place.
The 7 steps of the procurement process
The seven steps below follow the order most organizations recognize. Some purchases skip steps (a repeat order under an existing contract goes straight from request to purchase order), and complex purchases may loop back through sourcing more than once.
1. Identify and define the need
A business unit recognizes that it needs a product or service. A clear statement of the requirement and the budget gives procurement something to work with, while a vague one creates rework in every later step.
2. Submit and approve the request
The need becomes a formal request, usually through an intake form or a purchase requisition, and routes for approval against budget and policy. This is also where procurement decides how much process the purchase needs, from a simple catalog order to a full sourcing event. What is the intake-to-procure process? covers this front door in more depth.
3. Source and select the supplier
For new requirements, procurement researches the supply market, invites suppliers to respond to a request for information, proposal, or quote, and evaluates the responses against agreed upon criteria. For strategic categories this step is a process in its own right, which is why I published a separate 7-step strategic sourcing process.
4. Negotiate and sign the contract
Procurement agrees on price, service levels, delivery terms, and risk allocation with the selected supplier, then finalizes the contract. Legal and security reviews usually happen here, and they are often where the timeline slips.
5. Order and receive
A purchase order goes to the supplier under the agreed upon terms. When the goods arrive or the service is delivered, the business records the receipt and confirms it matches the order.
6. Match the invoice and pay
Accounts payable matches the supplier’s invoice against the purchase order and the receipt, then pays on the agreed terms once any exceptions are resolved. This is the core of procure-to-pay, which we explain step by step in Procure-to-Pay: The Process, and Why It Stalls So Often.
7. Manage supplier performance
The relationship continues after payment. Procurement tracks the supplier’s performance against the contract and uses the results to decide whether to renew the contract or go back to market. The metrics and frameworks for supplier performance management apply directly here.
Why other frameworks list 6, 8, or even 13 steps
Published procurement process frameworks vary widely in step count even though the activities overlap. The differences mostly come from where each one draws its starting and finishing lines, and how finely it splits the work in between.
Paras Sood, then a Procurement Strategist at Future Purchasing, made a key point on Art of Procurement podcast episode 567 about process design for different industries and use cases.
“Designing that process framework has to be relevant. A bank versus an FMCG company has a completely different value chain that it’s got to design.”
Paras Sood, Procurement Strategist, Future Purchasing, speaking in 2023 (Art of Procurement, Changing Procurement Hearts & Minds)
Procurement process vs procure-to-pay, source-to-pay, and source-to-contract
These three terms describe portions of the same procurement process, which is why they are so easy to confuse. The main difference is where each one starts and stops.
- Source-to-contract (S2C) is the strategic front half: understanding the need and the market, sourcing, negotiating, and contracting (steps 1, 3, and 4).
- Procure-to-pay (P2P) is the transactional back half, from the request through the order and receipt to payment (steps 2, 5, and 6).
- Source-to-pay (S2P) spans both halves, usually with supplier management and spend analysis attached. My quick take on source-to-pay software explains how the software market maps to that scope.
The procurement process is the broadest term of the four because it also includes the ongoing supplier relationship. When someone says their procurement process is broken, it is worth asking which half they mean, since the fixes differ.
Areas where the procurement process slows down
Most procurement processes look reasonable on paper. The trouble tends to show up at a few predictable points.
1. A front door that feels like an exam
One often mentioned challenge is how procurement engages with wider business stakeholders. If requesting a purchase takes longer than finding a workaround, people will find the workaround. Rujul Zaparde, co-founder and CEO of Zip, described the reaction in episode 406:
“If someone clicks in and they see 46 questions, they’re just going to think they’re not ready yet to go do it.”
Rujul Zaparde, Co-Founder and CEO, Zip (Art of Procurement, Improving Internal Perception of Procurement from Intake to Procure)
2. Review layers that nobody coordinates
Security, privacy, legal, and finance teams all have legitimate reasons to review certain purchases. When each function adds its own checklist without coordination, the reviews can add weeks to a timeline, and the requester experiences all of it as procurement taking too long.
In episode 666 of the Art of Procurement podcast, KR Barron, then Principal Product Marketing Manager at Productiv, separated the reviews that cannot be skipped (security, legal, and budget confirmation) from the ones that can bend. “I have no interest in process for process’s sake,” KR said, “or being a blocker to people getting what they need” (Debunking Common Software Procurement Myths).
3. Exceptions at the invoice level
Downstream, invoices that do not match the purchase order or the receipt create manual work for accounts payable and delay payment to suppliers. The root cause often sits upstream, in a purchase made without a purchase order or an order that never referenced the contract.
Who owns the procurement process?
In most organizations, procurement designs the process and runs sourcing and contracting in collaboration with other stakeholders. Business units own the need and the receipt, and accounts payable owns payment. With ownership that spread out, someone has to be accountable for the experience from end to end. Michael Denari, then Head of Global Procurement at Canva, was clear about where that responsibility sits:
“I own the intake-to-procure process. And if you are going to layer your process into my process and make requirements, I still own the deliverable.”
Michael Denari, Head of Global Procurement, Canva, speaking in episode 406 (Art of Procurement, Improving Internal Perception of Procurement from Intake to Procure)
Michael’s framing gives procurement the standing to challenge a review step that adds weeks without adding much protection. Owning the deliverable means owning the timeline, including the steps procurement does not perform.
How to measure whether your process works
Pierre Lapree, founder of Per Angusta and CPO of SpendHQ, has described how measurement tends to follow maturity. Early on, teams track process measures such as how long it takes to turn a purchase request into a purchase order. As the function matures, the focus moves to savings, then to value delivered and supplier collaboration (Art of Procurement episode 287, Best Practices for Managing Procurement Performance).
Pierre also warned against letting the dashboard outgrow the conversation it is meant to support. He suggested asking whether you “want to show shiny dashboards to a stakeholder or simply have a conversation with them based on two or three KPIs, something that matters to them.” A handful of measures your stakeholders care about, reported consistently, will do more than a crowded scorecard.
Where technology fits at each step
Most procurement technology categories map to one or two steps of the process. Knowing which step you want to improve makes the technology decision simpler.
Our procurement technology overview covers these categories in more depth, and why procurement needs intake management software looks at the front of the process specifically.
Automation also changes who does the work. Israel Santiesteban, a former Chief Procurement Officer and Head of Supply Chain, recommends automating the repetitive tasks first.
“A supplier onboarding document checkbox can be done by anyone. You don’t need a procurement certification to do it.”
Israel Santiesteban, Former Chief Procurement Officer and Head of Supply Chain (Art of Procurement episode 873, Creating Capacity for Complex Problem Solving)
In the same conversation, Israel described moving supplier onboarding to a dedicated service desk role, which freed about 40 hours a week of buyer time. Procurement automation pays off most when that time goes back into sourcing and supplier management.
Should your procurement process be a flywheel, instead?
Many diagrams draw the procurement process as a circle instead of a line. The CIPS Procurement and Supply Cycle, for example, arranges 13 stages in a loop, because what procurement learns from managing one contract should shape the next specification.
For a single purchase, the seven steps are the practical view. A cycle earns its place when you look at a whole category of spend over several years, and the strategic value procurement organizations bring. This is the thinking behind the project flywheel in the Procurement, Inc. framework we created at Art of Procurement back in 2020.
How the Procurement, Inc. flywheel works
The Procurement, Inc. framework describes the flywheel as a self-reinforcing loop that lets procurement keep increasing their influence and impact. It can be applied to any procurement initiative. The flywheel has seven steps grouped into four phases:
- Discover. Procurement works to understand the needs of the business and the capability of the supply market, then partners with the business through shared strategy goals and objectives.
- Design. Procurement plans the category or sourcing strategy and the tactics to deliver it, then selects and contracts with suppliers.
- Build. Procurement integrates the selected suppliers, implementing and onboarding them and putting in place the structure the business and supplier need to perform in line with requirements.
- Grow. Procurement collaborates with the business to make sure its goals and objectives are being met, and innovates through continuous improvement, new opportunities, and evolving business needs.
The difference from a linear process shows up after the contract is signed. In many sourcing events, procurement moves on to the next project once a supplier has been selected and contracted. The flywheel keeps them working with internal and external stakeholders to make sure the strategy delivers on the business's goals, and to find opportunities for continuous improvement or supplier-enabled innovation.
“When you apply the flywheel to a category of spend, procurement is fully integrated into the business stakeholder’s decision-making process.”
Philip Ideson, Founder, Art of Procurement (Art of Procurement episode 330, Applying the Flywheel Effect to Procurement (Part 2))
That integration changes what procurement is accountable for. With a linear process, the job is done when the specification is met and the contract is signed. With the flywheel, procurement stays responsible for whether the business gets the result it was buying for.
From operational function to agile business partner
The seven steps and the flywheel reflect two different views of procurement's role. When procurement is defined by the process they run, the business tends to see them as an operational function, a set of checkpoints between a need and a purchase. According to AOP's Procurement, Inc. ebook, teams in that position tend to buy through the lens of a single transaction. As leadership priorities swing between savings and value, they end up limited to the role of price reducer.
The ebook describes the alternative as procurement running like a strategic services business within the business. Teams that work this way understand what their internal customers need, bring what they know about the supply market into the business's decisions, and hold themselves accountable for the commercial value of every sourcing project. The framework groups these traits into four trademarks: customer-centric, connected, creative, and commercially focused.
In my view, agility sits at the heart of modern procurement frameworks. Stakeholders often feel that procurement puts process compliance ahead of operational efficiency, and the Procurement, Inc. ebook's answer is an infrastructure built for flexibility and agility. Creative teams adjust their methods to each situation and treat frameworks and decision guides as ways to scale and standardize their impact.
The seven steps still matter in this model. They describe how purchases move through the organization, and the flywheel's Design phase relies on them to select and contract suppliers. For a business partner, the process is a tool for delivering business outcomes. The ebook also notes that not every team needs to reach the top of its maturity model on all four trademarks, so the right level of partnership depends on what the business actually needs.
The bottom line on procurement processes
The procurement process is simple to describe but hard to run well. Seven steps take a purchase from an identified need to a paid, well-managed supplier. The details that decide whether your process works depend on your organization and industry, especially how easy it is to make a request, who coordinates the reviews, and whether anyone owns the experience end to end.
A well-run process is the foundation, and procurement leaders who stop there stay in an operational role. The teams that become business partners adapt the seven steps to how their organization buys, and they judge the work by the outcomes their stakeholders care about. For the categories that matter most to the business, the Procurement, Inc. flywheel gives procurement a way to keep that partnership going after the contract is signed.
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