In procurement, a service refers to the acquisition or purchase of intangible goods or activities that are performed by a supplier for the benefit of the buyer. Unlike physical products, services are typically not tangible and cannot be stored or inventoried. These services can be standalone or support the delivery or function of a physical product. Purchasing services involve identifying the service requirements, sourcing suppliers capable of delivering the service, negotiating contracts, and managing supplier relationships to ensure the required level of service is maintained. Examples of services in procurement include consulting, maintenance and repair, transportation, legal services, marketing, and IT support.
It's important for procurement professionals to carefully define their service requirements, establish clear performance metrics, and conduct thorough evaluations of potential service providers to ensure that the chosen supplier can meet the buyer's needs effectively and efficiently.
In the Services Procurement, requisitions can be created for planned or unplanned services.
Planned services: are services whose nature and scope is defined at the start of a procurement project:
- These requisitions would include parent lines that include the maximum spend, start date and end date for the expected service.
- Child lines are created, which include all items that would be included in the overall service.
- Suppliers create service sheets based on the details in the Purchase Order received without adding additional services or materials.
Unplanned services: are services whose nature and scope are not initially known, and the details might not be completely described in the early phase of the procurement process:
- The requisitions are created with a parent line with a mandatory maximum amount, start and end date, but no child line items under it.
- Supplier performing the service would create a service sheets adding child lines with the details of the work completed, as well as any material goods they used.
- Suppliers never see maximum amounts, but cannot exceed the expected maximum spend.