At first, procurement may appear all simple and basic, but it is more than locating the goods, receiving the goods and paying for the goods. Procurement has a lot of layers and the process comes with multiple stages. Here is a detailed guideline of how is the entire process is done.


A Brief About Procurement

Procurement is the method of locating and obtaining goods, services and facilities that an organisation needs to operate and run its business. Its end goal is to minimise the costs by finding suppliers, vendors, distributors and manufacturers so that the company gets what it needs. For the best outcome, businesses contact procurement service providers who can help them with the same.

Generally, the procurement process will initiate the right after the purchase request is made. It involves other steps like, identifying suppliers, bargaining the price, invoice consent and more. However, one should know that not all steps fit all the business models. There are several factors that determine the steps in a company’s procurement process, and those are business model, company’s size, company’s location, company’s structure, budget and spending, human resources.

Sometimes, things become more complex when some companies adhere to strict laws and maintain industry-specific guidelines that can also cause an impact to the steps involved.


The Steps Involved in the Procurement Process

Though every company’s procurement process is different, the steps act as building blocks to develop a successful strategy over time.


Step 1: Identifying the Goods/Services/Amenities Required by a Company

Before you can want something in your company, there has to be a need for it. Therefore, the first stage includes understanding what your business truly needs before you procure the product. It can be anything from a special item to a newly-launched service. Business owners, agents understanding procurement intelligence, department heads and procurement managers can tackle this step.


Step 2: Submit a Purchase Request

When you want to purchase the items that your company requires, you need to submit a purchase request via procurement software. The requests are reviewed by a financial controller team or a procurement team. Once it is approved, it gets turned into a purchase order. The request can be denied, and it gets returned to the employees with the reason why it is rejected.


Step 3: Assess and Select Vendors

Every company need to determine from where they have to procure the goods. Some have an approved vendor list, which consists of suppliers’ name, which has made it through the purchaser’s contract negotiations and selection criteria. There are other companies that are still trying to figure out who are the right suppliers. When a supplier is selected, companies form a cordial relationship with him over time to get the best price and value and save time on their future procurement.


Step 4: Negotiate Price and Terms

Once a supplier is chosen, the team make sure that they negotiate costs, terms and conditions for the purchase.


Step 5: Create a Purchase Order

A purchase order is a formal contract which can be used to purchase an item. This order outlines the cost, the requirements, terms and conditions and other added obligations. Once the contract is signed, the team forward the purchase order to the vendor. A legally binding contract is activated right after the vendor acknowledges the order.


Step 6: Receive and Inspect the Goods

The procurement service providers make sure that the goods are inspected before approving the invoice. One delivered, the quality controllers inspect the items and can reject the delivery if the product is not up to the standard. For instance, if the product is damaged or has a missing part, the quality controller team can reject the good.


Step 7: Three-way Matching is Conducted

This is one of the crucial steps in the process of procurement where the procurement team conducts a three-way matching. They check three documents and make sure that the transaction is accurate. Purchase orders, packaging slips and vendor invoices are checked so that there are no discrepancies because this can lead to huge loss of income. If there is any discrepancy, it should be examined and resolved.


Step 8: Invoice Approval and Payment Arranged

Once the three-way matching is done and everything looks good, the invoice is approved and the payment is arranged.


Step 9: Recordkeeping

The buying company must maintain proper records for accounting and bookkeeping purposes. This means that the team must save relevant documents for every purchase. Companies should not skip this step or they may find themselves in deep problems during a tax audit.


The Importance of Procurement in a Business

Procurement is vital as it directly lays an impact to the company’s profit. To have a profitable venture, the cost of the goods must be less than the price these are sold. By enacting the best procurement procedure, the buying company can ensure that it is obtaining goods, services and works at the best value and price. Additionally, procurement intelligence is associated with the prime business functions; hence it should be considered a crucial part of the company’s strategy.


To understand how procurement influences a company’s strategy, look below.

• Corporate Identity

– What does your company do?
– What beliefs form the company’s model?


• Market Placement

– Who are your customers?
– What do your customers want?
– What do your customers believe in?


• Company Abilities

– What are the company’s strengths and weaknesses?
– Do the company’s strengths support long-term goals?
– How does your company wish to grow?


• Management Issues

– Does your company need to hire talents to reach the goals?
– Does the company have resources to achieve the goals?


Procurement has become a necessity for a business to thrive in a competitive market. A well-shaped strategy must be used to get in touch with the right suppliers and the manufacturers so that you can acquire goods that are required by the company. The market placement, the company’s abilities, and the issues must be kept in mind before developing a procurement strategy.

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