For the uninitiated business owner, the procurement process can appear to be a simple, basic procedure.
Locate needed goods. Pay. Receive purchased goods. Document transaction.
But like all important (integral!) business functions, procurement is a layered, fluid business process with multiple moving parts; there are numerous stages in the procurement process.
Procurement is so dynamic, in fact, that it requires constant analysis and monitoring by purchaser or a purchasing department within an organization. There is always more to know, more data to analyze, more forecasts to produce — all such responsibilities rest with procurement.
So…what are the stages in the procurement process? What are those constantly evolving pieces in procurement?
Stages in the Procurement Process
As one learns more about the procurement realm, it becomes glaringly obvious that each of the writers, theorists and consulting firms involved in procurement has a slightly different take on the stages in the procurement process.
Step 1: Need Recognition – This is a seemingly obvious step, but one that needs to be mentioned. A business owner (or procurement department) must recognize a product is needed in order to purchase it. That product can be either a brand new item, or one that is being re-ordered.
Step 2: Specific Need – Does your industry have specific requirements for various products? If that is the case in your industry, be sure you are up-to-date on those requirements and order accordingly.
Step 3: Source/Examine Supplier Options – Every business needs to determine where to get their goods. Some companies have an approved vendor’s list that have gone through the Purchaser’s selection criteria and contract negotiations while other companies are still trying to determine who the best suppliers are. Once a supplier is chosen, companies should stick with that relationship and try to establish the best value, get the right price, and save time on their procurement activities.
Step 4: Price and Terms – Once a supplier is chosen, companies should stick with that relationship and try to establish the best price and specific terms (i.e. delivery).
Step 5: Purchase Order – The purchase order is a formal contract used to buy the product. The purchase order outlines the price, specifications and terms and conditions of the product or service and any other additional obligations.
Step 6: Delivery – The transfer of the purchase order via email, mail or fax (email is highly recommended).
Step 7: Expediting – This stage addresses the timeliness of the service or materials delivered. Delays, for many businesses, are important. The purchase order will have expected delivery date information.
Step 8: Receipt and Inspection – Once delivered, the receiving company inspect and, subsequently, accepts or rejects the product. Rejection is almost always due to a damaged product.
Step 9: Invoice Approval and Payment – At this stage, three documents must match when the vendor wants payment – the invoice, the receiving document (attached to the product) and the original purchase order. This is known as three-way matching. If there is a discrepancy, it must be resolved before payment is made.
Step 10: Record Keeping – The receiving (buying) company must keep good records. This means saving all relevant documents for every completed purchase.
How Can E-Procurement Help?
An e-procurement solution can be a significant source of help in various stages of the procurement process. For instance, an e-procurement solution will electronically generate purchase orders, with all of the requisite information and can help with supplier management.
Also, an e-procurement solution is a critical tool when it comes to delivery and record keeping. With an e-procurement solution, all purchase orders will be sent electronically in the system (an email notifying all parties will be sent as well), ensuring delivery is completed immediately.
Finally, an e-procurement solution will catalogue every transaction in the system, ensuring your records are kept up-to-date. Those records are of critical importance for financial forecasting, or in the event of an audit.
The benefits of an e-procurement system like Procurify extend to each stage of the procurement process. Stream line your purchasing and procurement processes, reduce employee headaches, eliminate annoying paperwork.