It goes without saying that the procurement process is complex and involves the entire organization. Being an overwhelming process, it entails efforts from all the various departments of a company. With a proficient procurement team, combining business strategy to steer procurement in the right direction becomes easier. In fact, companies can maximize the value of the contribution by incorporating a significant tool like a procurement strategy. It can also be said that a procurement strategy also serves as the necessary guide for every organization and ensures that it aligns with the entire business strategy. As per the words of supplier development engineer experts worldwide, organizations having a procurement team can work better to have their business objectives fulfilled.
By having a good procurement process, companies can avail benefits like getting goods and services at the best price, selecting reputable sellers and saving time and reducing order delays and errors. An organization’s operations and requirements differ largely from the other organizations. In this blog, we shall discuss the essential steps of the procurement process.
Stages of a Successful Procurement Process
Recognizing the needs: The procurement process begins when a business recognizes the requirement of a better service or product. These services or products can either be internal (materials required to operate the business) or external (materials which the business will sell gradually). Organizations may also set a budget within which they would procure services or products. This, in turn, prevents companies from ending up paying an excess price thereby exceeding their budget.
Selection of the seller: Selecting the seller is one of the essential steps in the procurement process. A detailed comparison must be performed to determine which seller provides the best services or goods at the right price. Finding supplier auditors or any vendor that provides a premium quality product or service at a competitive price is not enough. The vendor must also have a good reputation in the industry.
Collecting essential supplier information: This involves coming across essential information that will help you to select the supplier after careful consideration. If the supplier is unable to fulfill the demands and requirements, the organizations can incur a huge loss. Hence, the supplier must be assessed on the basis of his/her credit reports, previous performance and references.
Developing a sourcing and outsourcing strategy: Based on the information collected in the above-mentioned steps, you can create sourcing strategies in three different ways:
- Direct purchase: Submitting an RFQ (Request for Quote) or RFP (Request for Proposal) to the selected suppliers
- Procurement: Buying from the desired supplier
- Strategic alliance: Signing a contract with the chosen seller
Internal approval: The next stage in the procurement process is the internal approval which means signalling approval from the internal department that controls the finances for procuring services or goods. A purchase requisition document must be created and submitted to the internal department.
Order details and payment: This is the stage when the chosen supplier sends an invoice to the procurer which has the complete details of the order. The invoice acts as proof of sale as well as informs about when the payment must be made. Then comes making the payments to the seller within the agreed time-frame. The order must be checked by the supplier auditors and then handed over to the procurer. The payment can be made in the form of cheque, cash, bank transfers and so on.
Maintaining a record: This is the final stage of the procurement process that involves maintaining an all-round record for audit purposes. This includes procuring records to validate tax information as well as using it for future purchases and purchase orders to verify warranty information.
Procurement process is a complex task for every company. Unless you are aware of the right procurement stages, fulfilling the business objectives can be a daunting task. Whether you are procuring supplier development engineer experts or any product, an appropriate procurement strategy is all you need to ensure maximization of value contribution and success for your company.