Procurement and sourcing play a vital role in contemporary business operations by ensuring a steady flow of raw materials, services, and components required for production. Effective procurement practices involve supplier selection, contract negotiation, and relationship management (Monczka et al., 2020). In today’s globalised and competitive environment, firms are under pressure to optimise costs, guarantee quality, and foster innovation through strategic sourcing and supplier relationship management (SRM). This article explores the critical dimensions of procurement and sourcing, supported by examples from manufacturing, construction, healthcare, and service industries.
Theoretical Foundations of Procurement and Sourcing
Procurement refers to the acquisition of goods and services from external sources, while sourcing involves identifying, evaluating, and engaging suppliers to deliver these goods and services (Shivdas et al., 2025). Strategic sourcing integrates procurement decisions with organisational goals, making it a core driver of competitive advantage.
According to Monczka et al. (2020), organisations that treat procurement as a strategic function—rather than a transactional one—benefit from reduced costs, improved supplier performance, and enhanced innovation. Textbooks in supply chain management emphasise that total cost of ownership (TCO), risk management, and sustainability should guide sourcing decisions (Chopra & Meindl, 2021).
Supplier Selection and Evaluation
One of the most critical aspects of procurement is supplier selection, which determines the organisation’s ability to achieve cost efficiency and product quality. Traditional criteria such as price, quality, and delivery reliability are now supplemented by sustainability, innovation capability, and risk resilience (Forozandeh & Khalafi, 2025).
For example, in the healthcare sector, Shivdas et al. (2025) propose a novel framework for supplier classification, highlighting how selecting the right supplier reduces supply disruptions and improves patient outcomes. Similarly, Seikku (2025) shows how Finnish forest industry firms incorporate environmental, social, and governance (ESG) criteria into supplier selection, ensuring alignment with sustainability goals.
The use of multi-criteria decision-making methods such as the Analytic Hierarchy Process (AHP) and TOPSIS has been widely applied to evaluate suppliers, balancing trade-offs between cost, quality, and risk (Forozandeh & Khalafi, 2025).
Contract Negotiation and Management
Negotiating contracts is essential for establishing terms that balance risk and value for both parties. Albuschus Svanvik and Chouri (2025) show that Swedish private sector firms increasingly rely on fact-based negotiations, leveraging data analytics to achieve fair pricing and performance guarantees.
Contracts also need to include service-level agreements (SLAs), risk-sharing clauses, and compliance with sustainability standards. For example, multinational companies sourcing from low-cost countries are now incorporating social responsibility clauses to address concerns over labour exploitation (Pintuma et al., 2025).
Strategic Supplier Relationships
Beyond transactional exchanges, modern procurement emphasises long-term partnerships through Supplier Relationship Management (SRM). Strategic supplier collaboration enables co-innovation, risk reduction, and better cost control (Bargouthi et al., 2025).
In the construction industry, Ako and Peculiar (2025) found that strategic procurement practices improve project performance by fostering stronger vendor relationships. Similarly, in the hospitality sector, Sharma (2025) highlights how B2B procurement practices focus on building trust and collaboration to improve service delivery.
An illustrative example is Toyota’s keiretsu model, where close ties with suppliers enable continuous improvement and innovation, demonstrating the importance of supplier integration into long-term business strategies.
Technology and E-Procurement
Technological advancements such as e-procurement platforms, cloud systems, and artificial intelligence (AI) are transforming procurement. Tatini (2025) argues that AI-driven procurement agents can analyse market conditions, supplier performance, and risk factors to support decision-making.
Perante et al. (2025) highlight how cloud-based procurement systems improve efficiency by automating purchase orders, inspection, and reporting. Similarly, Vencentius and Semente (2025) stress that SMEs adopting e-procurement face challenges such as high implementation costs, but gain benefits in transparency and cost efficiency.
Sustainability and Ethical Procurement
Modern sourcing is increasingly shaped by sustainability and ethical considerations. Organisations are expected to ensure that their suppliers adhere to environmental and labour standards. Omondi et al. (2025) show that NGOs in Kenya emphasise green procurement to reduce environmental impact.
For example, multinational companies like Unilever enforce strict sustainability requirements across their supplier base, ensuring compliance with ethical sourcing standards. Seikku (2025) demonstrates how ESG criteria guide supplier choices in the forest industry, aligning procurement with corporate social responsibility (CSR) goals.
Global Procurement Challenges
Despite its advantages, procurement faces challenges including supply chain disruptions, price volatility, and geopolitical risks. Pintuma et al. (2025) discuss the strategic risks of low-cost country sourcing, where firms often face trade-offs between cost savings and risk exposure.
The COVID-19 pandemic revealed vulnerabilities in global supply chains, emphasising the need for resilient procurement strategies (Zapinski, 2025). Companies are now prioritising supplier diversification and regional sourcing to mitigate future disruptions.
Case Studies and Industry Applications
- Healthcare – Supplier classification models reduce costs and improve patient outcomes (Shivdas et al., 2025).
- Construction – Strategic procurement improves project delivery timelines and quality (Ako & Peculiar, 2025).
- Hospitality – B2B procurement fosters strong supplier partnerships for service excellence (Sharma, 2025).
- Manufacturing – Toyota’s keiretsu demonstrates the benefits of long-term supplier integration.
- Forestry Industry – Finnish firms use ESG metrics to balance sustainability with operational efficiency (Seikku, 2025).
Procurement and sourcing are no longer administrative functions but strategic enablers of competitive advantage. By effectively managing supplier selection, negotiation, and relationship development, firms can reduce costs, enhance quality, and promote innovation. Moreover, technology, sustainability, and resilience are shaping the future of procurement, demanding greater agility and long-term partnerships.
Companies that view procurement strategically, rather than transactionally, will gain significant competitive advantages in an uncertain global marketplace.
References
Ako, E. & Peculiar, N.N. (2025). Procurement management practices as a strategic tool for project performance: The case of construction companies in the Northwest Region, Cameroon. International Journal of Business Research and Management. [Available at: https://isapublisher.com/wp-content/uploads/2025/01/Procurement-Management-Practices-as-a-Strategic-Tool-for-Project-Performance-The-Case-of-Construction-Companies-in-the-Northwest-Region-Cameroon-ISAP.pdf].
Albuschus Svanvik, H. & Chouri, H. (2025). To what extent are fact-based price negotiations with existing suppliers used in the Swedish private sector? Chalmers University of Technology. [Available at: https://odr.chalmers.se/items/197f439d-26d0-4b2a-baf2-a46afa541103].
Bargouthi, M.I., Bharadwaj, P. & Byramjee, F. (2025). The influence of selected supply chain management practices on SMEs performance: The mediating role of competitive advantage. Journal of Global Operations and Strategic Sourcing. [DOI: 10.1108/jgoss-08-2024-0071]
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