Types of Procurement in Supply Chain Management with Examples | Future of Procurement 2025
Meta Description: Discover the key types of procurement in supply chain management, with examples
and insights into the future of procurement 2025. Learn how to optimize your sourcing strategy.
Procurement serves as the fundamental element of supply chain management, involving the strategic acquisition of essential goods, services, and work required to support business activities. Grasping the various procurement methods in supply chain management is essential for businesses seeking to enhance efficiency, cut expenses, and sustain a competitive edge. As the future of procurement 2025 approaches, new technologies and shifting market dynamics are shaping how businesses source their needs. This article dives deep into the major types of procurement, examples across industries, current trends, challenges, and expert predictions to help you prepare for the future.
At its core, procurement involves identifying business needs and obtaining the required resources—goods, services, or works—at the best value while ensuring timely delivery and quality. Procurement in supply chain management goes beyond simple purchasing; it includes supplier negotiation, contract management, risk assessment, and continuous improvement to build resilient supply chains.
Procurement can be broadly classified into four main types that collectively cover all sourcing activities businesses engage in:
Procurement Type | Definition | Examples |
Sourcing essential materials and parts needed for the production of finished goods. | Steel for automotive manufacturing, flour for bakeries | |
Procuring goods and services that facilitate daily business functions without being included in the end product. | Office supplies, IT software licenses, cleaning services | |
Acquiring tangible assets, including both direct and indirect materials. | Raw materials, office furniture, packaging | |
Contracting people-based services or external expertise for operational or project needs | Marketing agencies, legal counsel, IT consultants |
Strategic direct procurement plays a vital role in shaping the quality and overall success of the end
product or service. It primarily involves raw materials, components, machinery, or services integral
to production.
Examples:
An automobile company purchasing steel, engines, and transmissions necessary to manufacture cars.
An electronics firm sourcing microchips and display panels to assemble smartphones.
Because these items directly impact the product’s performance and cost, companies often form
long-term strategic relationships with their suppliers to ensure continuity, quality, and innovation.
2. Indirect Procurement
Unlike direct procurement, indirect procurement supports internal operations. It includes purchases
not related to product manufacturing but essential to keep the business running.
Examples:
A corporate office buying furniture, software licenses, or catering services.
A retail chain contracting cleaning and maintenance vendors for their stores.
Effective management of indirect procurement can significantly reduce operational costs because these often involve numerous smaller transactions across diverse categories and departments.
3. Goods Procurement
Goods procurement specifically focuses on the acquisition of physical, tangible items required for both direct production and indirect uses.
Examples:
A manufacturing plant buying packaging materials for finished goods.
This procurement type emphasizes quality controls and cost management to prevent disruptions in inventory and operations.
4. Services Procurement
Services procurement involves strategically acquiring talent, specialized skills, and professional
services essential for driving business operations and expansion.
Examples:
Engaging a marketing agency to run a branding campaign.
Contracting an IT security firm to manage cyber defenses.
Hiring construction contractors for a new office building project.
The procurement landscape in 2025 is being transformed by digital innovation, intelligent automation, and a strong commitment to sustainable practices. Organizations are increasingly adopting e-procurement platforms, AI-powered analytics, and blockchain technologies to improve transparency and efficiency.
Digital Procurement Transformation: Automation streamlines purchase-to-pay processes, reducing errors and enabling real-time spend analysis.
Supplier Collaboration and Risk Management: Enhanced data sharing helps identify supply risks early and fosters innovation through closer partnerships.
Sustainability Focus: Green procurement practices are growing, prioritizing suppliers with eco-friendly processes.
Data-Driven Decision Making: Advanced analytics guide smarter sourcing and cost-reduction strategies.
Resilience and Agility: Lessons from recent supply chain disruptions drive procurement to diversify suppliers and build flexible contracts.
While technology advancements provide numerous opportunities, procurement teams face challenges such as:
Challenge | Solution |
Data silos across departments hindering visibility | Implement integrated procurement software platforms |
Supplier reliability and geopolitical risks | Maintain diversified supplier bases with contingency planning |
Managing increasing compliance and sustainability demands | Adopt automated compliance tools and supplier audits |
Skilled talent shortage in procurement analytics | Invest in workforce training and continuous learning programs |
According to The Hackett Group, companies adopting “digital world-class” procurement achieve up to a 96% higher spend cost reduction.
Gartner forecasts global spending on procurement technology tools will exceed $7 billion by 2025, driven by AI and cloud adoption.
Research indicates organizations focusing on supplier collaboration report 40% fewer supply disruptions.
Invest in Technology: Begin adopting e-procurement and AI analytics tools if not already in place.
Enhance Supplier Relationships: Focus on building lasting collaborations through transparent and ongoing communication.
Focus on Sustainability: Implement environmentally responsible procurement policies that closely align with the company’s corporate social responsibility objectives.
Upskill Procurement Teams: Train staff on new technologies and strategic sourcing techniques.
Develop Contingency Plans: Prepare for sudden disruptions by diversifying suppliers and geographic locations.
Organizations preparing for the evolving landscape of procurement over the next few years should adopt a multi-faceted approach focused on technology adoption, strategic agility, sustainability, risk management, and workforce development.
Key effective ways include:
1. Invest in AI and Automation
Implementing AI-powered procurement tools enables automated supplier selection, demand forecasting, and risk assessment. Robotic process automation (RPA) can streamline repetitive tasks such as purchase order processing, reducing errors and freeing procurement teams for strategic work. Training teams to work alongside AI enhances decision-making capacity and overall efficiency.3. Adopt Agile Procurement Models
Agile procurement emphasizes adaptability, rapid decision-making, and swift response to changing
market conditions. This includes embracing nearshoring and local sourcing to reduce supply chain
risks, employing on-demand or just-in-time procurement to optimize inventory, and utilizing adaptable
contract terms to quickly respond to disruptions and pricing fluctuations.
4. Enhance Supplier Collaboration and Ecosystem Development
Building strong, collaborative relationships with suppliers drives innovation, risk sharing, and improved supply chain continuity. Engaging suppliers through joint projects and transparent data sharing fosters mutual benefits and resilience in uncertain markets.
5. Strengthen Cybersecurity and Data Governance
With the rise of digital procurement, safeguarding confidential supplier and transaction data has
become a top priority to prevent cyber threats and ensure data integrity. Companies must enforce
strong cybersecurity protocols, conduct supplier audits, implement multi-factor authentication (MFA),
and ensure compliance with privacy regulations through robust data governance frameworks.
6. Leverage Procurement as a Service (PaaS)
Outsourcing procurement functions to expert third-party providers allows for scalable, cost-effective operations while tapping into specialized knowledge. Integration between in-house teams and PaaS providers maximizes flexibility and operational efficiency.
7. Build a Data-Driven Procurement Function
Using advanced analytics and predictive modeling, organizations track key performance indicators (KPIs) like supplier reliability, cost savings, and compliance metrics. A culture of data literacy enables procurement teams to make strategic, evidence-based decisions.
8. Position Procurement as a Strategic Business Partner
Procurement leaders should be integrated into C-suite discussions to align procurement strategy with broader business goals, including revenue growth and innovation. Cross-department collaboration enhances decision-making and underlines procurement’s role beyond cost reduction.
9. Invest in Talent and Skills Development
Upskilling procurement personnel in AI, data analytics, strategic sourcing, and digital tools equips organizations to leverage technological advances and handle evolving procurement complexities effectively.
By combining these strategies, organizations can enhance procurement agility, risk management, cost efficiency, and sustainability, positioning themselves competitively for the future of procurement 2025 and beyond.
What are the key skills procurement teams need to prepare for 2025
The key skills procurement teams need to prepare effectively for 2025 focus on digital transformation, strategic collaboration, ethical and sustainable sourcing, data analytics, and strong interpersonal capabilities. Based on recent industry insights, here are the most important skills in detail:
Procurement professionals must be adept at using digital procurement platforms like SAP Ariba, Coupa, or AuraVMS, along with AI-powered analytics and blockchain for supply chain transparency. This expertise allows streamlined processes, data-driven decision-making, and cost efficiencies. Technology literacy is no longer optional but fundamental, enabling automation of routine tasks and enhanced supplier risk management.
Procurement is increasingly a bridge between finance, operations, IT, and suppliers. Professionals must engage stakeholders effectively, align procurement goals with broader organizational strategies, and foster open communication, empathy, and negotiation skills to build consensus and trust among diverse teams.
Effective negotiation abilities are crucial for achieving cost efficiencies, securing advantageous terms, and fostering win-win partnerships. Combined with knowledge of procurement law and contract frameworks, this skill enables procurement teams to manage risks and ensure compliance while optimizing supplier relationships.
4. Analytical and Data-Driven Decision Making
With an abundance of data available, procurement specialists need advanced analytical skills to interpret market trends, supplier performance, and cost structures. This capability supports strategic sourcing, risk mitigation, and overall supply chain resilience.
As environmental and social governance (ESG) demands grow, procurement teams must implement sustainable sourcing strategies, audit supplier compliance, and reduce carbon footprints. Familiarity with sustainability standards such as ISO 14001 and frameworks like GRI is vital to meet regulatory and corporate social responsibility goals.
Procurement professionals should be comfortable leading change initiatives, adapting to fast-evolving technologies and market conditions, and driving innovation within their teams and supplier networks. Agility and openness to continuous learning will be critical in managing evolving procurement roles.
Building strong, transparent, and trust-based supplier relationships ensures reliability, innovation, and risk sharing. This includes maintaining supplier health and aligning supplier goals with organizational objectives.
Skill | Importance |
Digital Transformation | Essential for process automation and insights |
Stakeholder Management | Aligns procurement with company-wide objectives |
Negotiation & Contracting | Secures value and manages legal risks |
Data Analytics | Drives strategic sourcing and risk mitigation |
Sustainability Expertise | Enables compliance and ESG alignment |
Change Management | Facilitates adaptation and innovation |
Supplier Relationship Mgmt | Builds supply chain resilience and collaboration |
These skills reflect the evolving role of procurement as a strategic, tech-enabled, and ethically responsible function, preparing teams for the dynamics of procurement in 2025.
If you want to stay updated on procurement career development or enhance your team's capabilities, consider subscribing to industry newsletters or professional certification programs focusing on these future-critical skills.
Procurement in supply chain management includes direct, indirect, goods, and services procurement, each critical to organizational success.
Direct procurement encompasses the acquisition of raw materials and components that are integral to manufacturing finished products, whereas indirect procurement involves purchasing goods and services that facilitate everyday business operations without being part of the end product.
Emerging technologies like AI, e-procurement, and blockchain are transforming procurement processes toward higher efficiency and resilience.
Sustainability, risk management, and supplier collaboration are pivotal for the future landscape.
Q1: How do direct and indirect procurement differ from each other?
Direct procurement is for materials and services involved in producing finished products. Indirect procurement covers goods and services that support company operations but are not part of the final product.
Q2: How does technology impact procurement?
Technologies like e-procurement platforms and AI enable automation, better data analytics, improved supplier management, and cost reductions.
Q3: What are some examples of services procurement?
Hiring marketing agencies, legal firms, IT consultants, or contractors for specific projects are common examples of services procurement.
Q4: Why is supplier relationship management important?
Maintaining strong relationships enhances supply continuity, negotiates better terms, fosters innovation, and reduces risks.
Q5: How can companies prepare for the future of procurement?
Companies should adopt digital tools, embrace sustainability, diversify suppliers, and continuously develop procurement skills.
The future of procurement 2025 promises a dynamic landscape defined by digital innovation, sustainability commitments, and strategic supplier partnerships. Understanding the types of procurement in supply chain management and their examples equips professionals to design robust sourcing strategies that reduce risk, lower costs, and enhance value. Embracing emerging technologies and adapting to market shifts is not just an option—it is essential for thriving in tomorrow’s competitive market.
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