Written by Marijn Overvest | Reviewed by Sjoed Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

What is Operational Procurement?

Operational procurement is defined as the procurement of the goods or services that are needed to sustain the daily operation of a business. Some referred to it as MRO purchasing which pertains to maintenance, repair, and operations due to its significance to keep the business running. 

You may think that this is the same as tactical purchasing. However, this is not true since tactical purchasing is focused on short-term transactional activity. Operational procurement takes a reactive action concerning the purchase of materials, supplies, or services.

It relies on using fast quotes and purchase orders so that the production can continue its efficient and effective operation. 

Additionally, it should not be confused with strategic sourcing which is more focused on the long-term approach. Strategic sourcing promotes the timely supply of goods or services that are needed to meet the objectives of an organization. 

Usually, operation purchasing managers work to enhance contract management, delivery management, and managing any feedback. Operational procurement streamlines purchasing processes so that the business can easily access the resources whenever it needs them, in the right place, right quantity, and best possible price. 

Its most important role in the business is to coordinate with other processes and cut costs. Additionally, it works more in real-time. Thus, requires a system to support real-time inventory reporting, purchasing, and electronic document transmission.

The Operational Procurement Process

The following are the steps on how operational procurement works:

1. Know the demand

The first step in this approach to procurement is to know the demand. It involves a lot of time to know what materials or services the company needs to continue its operation. 

Once you have found out all the details of what the company needs, it’s time to determine the sources. In this phase, you will answer the questions of who will be able to deliver the materials or services when needed and where they will be used.

2. Selecting a supplier that best suits you

It is necessary to make supplier selections based on the current purchase time, quantity, and quality. 

If the procurement department or team does not currently have a contracted supplier to meet the needs of the requisition, they can send out a request for quotation (RFQ) to ask suppliers about their terms for the specific order. 

Suppliers that can meet the requirements will provide a quote that lists their exact terms and conditions for the order delivery. This transaction becomes the first binding document of the operational procurement process. 

If the quote is accepted but the terms aren’t complied with, then it can be considered a breach of contract which may constitute legal action. 

The procurement department will compare the quotes and select the best offer. The factors in selecting the best supplier are that it is the most affordable price, offers the highest quality, and can deliver the goods or services on time.

3. Order Monitoring

Once you have selected a supplier, it is time to convert the purchase requisition to a purchase order so that it can be a legally binding document. 

Of course, while waiting for the orders to be delivered, the orders should be monitored. This phase involves checking to see if the stocks are going to be available on time. 

Once the goods arrive, they are registered in the inventory and checked against the order to ensure that the supplier fulfilled it correctly. 

If there are inconsistencies between the purchase order and the goods that arrived, you can call your supplier to resolve the problem. If the supplier does not comply, it may be necessary to pursue legal action.

4. Invoicing

Once the goods have been received and match the purchase order, then it’s time to move to invoice processing. The invoice is the final document in the procurement process.

The payment should be processed immediately after receiving the order receipt from your supplier. Late payments can damage your relationship with your supplier which leads to costly late fees and delayed repeat orders. 

Operational vs Strategic Procurement

Procurement plays a critical role in business operations, but not all procurement strategies are the same. While some organizations rely on operational procurement to meet immediate needs, others adopt a strategic approach to optimize costs, enhance supplier relationships, and drive long-term value.

The term “traditional procurement” is sometimes used to describe older, more rigid procurement methods that may not be fully adapted to modern business requirements. However, in professional literature, the more common distinction is between operational procurement, which focuses on short-term purchasing, and strategic procurement, which emphasizes long-term planning and optimization.

Let’s explore the key differences between these two approaches and their impact on business efficiency.

Operational vs. Strategic Procurement

By balancing operational efficiency with strategic foresight, businesses can enhance procurement effectiveness and gain a competitive edge.

How to Move from Operational to Strategic Procurement

Many organizations operate in a reactive procurement mode, focusing on fulfilling immediate needs rather than strategically planning for the future. Transitioning from operational procurement to strategic procurement can help businesses reduce costs, improve supplier relationships, and enhance overall efficiency.

Here are the key steps to move from operational to strategic procurement:

1. Shift from Transactional to Value-Driven Procurement

Operational procurement focuses on day-to-day purchasing and immediate needs, while strategic procurement involves long-term planning, risk management, and value creation. As a key action step, it’s important to move beyond mere purchasing by evaluating suppliers based on total cost of ownership (TCO), risk factors, and long-term benefits rather than just price.

2. Develop Supplier Relationships and Partnerships

Operational procurement treats suppliers as one-time vendors, whereas strategic procurement focuses on building long-term partnerships with key suppliers. As a key action step, it’s essential to establish supplier collaboration models—such as joint development projects, strategic contracts, and innovation-driven partnerships—to foster deeper and more effective relationships.

3. Implement Data-Driven Decision-Making

Operational procurement often relies on manual processes and reactive decision-making, whereas strategic procurement leverages data analytics, AI, and predictive modeling to optimize procurement strategies. As a key action step, organizations should invest in e-procurement solutions and analytics tools to effectively track spending patterns, supplier performance, and procurement KPIs.

4. Integrate Risk Management into Procurement Strategy

Operational procurement focuses mainly on price and availability, whereas strategic procurement considers supply chain disruptions, regulatory compliance, and sustainability risks. As a key action step, organizations should conduct risk assessments for key suppliers and develop contingency plans for potential disruptions.

5. Align Procurement with Business Goals

Operational procurement works in isolation, focusing primarily on cost savings, whereas strategic procurement aligns with corporate strategy to drive competitive advantage. As a key action step, procurement decisions should be integrated with broader company objectives such as sustainability, digital transformation, and market expansion.

Moving from operational to strategic procurement offers a host of benefits. It improves cost efficiency through better supplier contracts and risk reduction, enhances supplier collaboration which drives innovation and strengthens supply chain resilience, and ensures stronger compliance with legal, ethical, and sustainability standards. Additionally, it increases an organization’s agility in responding to market changes and disruptions, aligning procurement practices with broader corporate strategy to pave the way for long-term growth and competitive advantage.

Optimizing Operational Procurement

Integration and training in the ERP system and order management software are needed for efficient operational procurement nowadays. These systems handle the completion of some tasks and reduce process effort. 

Additionally, contractual conditions, suppliers, product procurement and delivery conditions, and sizes can be preset. These software tools can greatly reduce process costs without neglecting the procurement’s control of condition and specification. 

To efficiently support the monitoring and control of costs in procurement, there are analysis dashboards that can be integrated into operational procurement. 

Advantages of Operational Procurement

Companies can gain financial benefits from operational procurement because larger contracts can be negotiated with suppliers for goods or services utilized in a different company location. 

Additionally, a company can save on labor costs as the entire process flow runs smoothly and procurement processes do not need to start over and over again from scratch. The history of the procurement process is accessible and shared within the organization. 

Furthermore, a company can see improvements in its reporting capabilities as it can extract data from the system and generate reports on a variety of key performance indicators that pertain to the entire procurement process. 

Examples of Operational Procurement

1. Amazon – Procurement of Packaging Materials

Operational Procurement Example: Amazon uses an automated system within its vast e-commerce logistics network to monitor packaging materials—such as boxes, tape, and protective fillers—and automatically reorders them based on real-time usage data. This system is closely integrated with warehouse operations to ensure a steady supply of necessary materials.

Goal: The main objective is to prevent any disruptions in the supply chain and maintain seamless order fulfillment by ensuring packaging materials are always in stock.

Outcome: As a result, Amazon minimizes delays in shipment processing, reduces operational downtime, and sustains high customer satisfaction through uninterrupted delivery services.

2. McDonald’s – Procurement of Ingredients for Daily Operations

Operational Procurement Example: McDonald’s employs a proactive procurement strategy where essential ingredients like buns, meat, cheese, and vegetables are regularly ordered based on precise sales forecasts and demand analytics. The company leverages automated ordering systems and strong vendor relationships to guarantee timely deliveries to its restaurants.

Goal: The objective is to ensure consistent food production, maintain quality standards, and avoid stock shortages that could compromise daily operations.

Outcome: This approach has led to improved operational reliability, fewer instances of ingredient shortages, and consistent product quality across all locations, thereby reinforcing customer trust and brand loyalty.

3. Toyota – Procurement of Spare Parts in Manufacturing

Operational Procurement Example: Toyota’s Just-in-Time (JIT) manufacturing model relies on ordering spare parts and raw materials only when they are needed for production. This system is tightly coordinated with production schedules to ensure materials are delivered exactly when required, thereby minimizing excess inventory.

Goal: The goal is to reduce inventory costs and avoid production delays by synchronizing procurement activities with manufacturing demands.

Outcome: By implementing this strategy, Toyota has achieved significant cost savings in inventory management, enhanced production efficiency, and maintained a continuous flow in manufacturing, contributing to its reputation for reliability and timely production.

Procurement Expert’s Insights on Operational Procurement

For this article, we asked an experienced procurement expert to share her insights to help answer common questions about operational procurement.

Conclusion

Operational procurement plays an important role in sustaining the daily operations of a business by efficiently acquiring the necessary goods and services.

Its process involves understanding demand, selecting suitable suppliers through RFQs, monitoring orders, and processing invoices. Real-time coordination, streamlined purchasing processes, and the use of electronic systems are crucial for its success.

Overall, a well-optimized and efficiently managed operational procurement system contributes significantly to the growth and success of a business by ensuring the timely and cost-effective availability of resources crucial for daily operations.