What does "procurement" refer to in supply chain management?

Procurement in supply chain management specifically refers to the process of acquiring goods and services from external sources. This involves several key activities including identifying needs, selecting suppliers, negotiating contracts, and purchasing goods or services. Effective procurement is essential as it helps organizations ensure they have the right materials when needed, at the right price, and from reliable suppliers.

This process is not limited to just purchasing but encompasses a strategic approach that aligns with an organization’s overall goals. It plays a critical role in managing supplier relationships and ensuring that the quality and availability of goods meet the organization’s requirements.

The other options refer to important aspects of supply chain management but do not define procurement itself. Auditing supplier performance focuses on evaluating suppliers after the procurement phase, inventory management strategies deal with the control and optimization of stock levels within an organization, and analyzing transportation costs is a separate consideration related to logistics and distribution rather than procurement activities.