Management in any company must understand the art of purchasing products and services. The planning, purchasing and marketing are the key stages of good procurement exercise. The procurement cycle follows specific steps for identifying a requirement or need of the company through the final step of the award of the product or contract. For every procurement project, a formal and professional procurement process will save time, save money and reduce risk. Responsible management of public and corporate funds is vital when handling this necessary process, whether in strong or weak economic markets. Many businesses use automated tools such as an Enterprise Resource Planning (ERP) system and Electronic Data Interchange (EDI) to assist procurement specialists or buyer with the buying activities. Regardless of whether an automated system is used, the goal of the procurement process is to buy the exact product or service when needed for the most favorable price. Following are ten proven step by step techniques through which an organization can successfully achieve their goals.
Requirement Recognition
Procurement activities in
an organization start right since the stage a need is felt for any material or
service and organization must know it needs a new product, whether from
internal or external sources. If the
business has an automated system, typically a purchase requisition (PR) will be
sent to the buyer indicating what product or service is needed.
Specific
Need
Requirements for goods and
services originate from different users. In emergencies, the response teams in
various sectors request for basic supplies to meet the needs of those affected.
The needs range from blankets, mosquito nets, tents to food supplies, household
items, etc. The needs are communicated to procurement in the form of a
“request”. These requests may be electronic, hard copy or verbal, and may be
very specific where the users know exactly what they need in terms of
specification, quantities, and delivery details. Or they may be less specific
where the users are not able to provide exact information.
Items
Source Options
The organizations always
needs to identify that where to obtain the product. Many organizations have
their own Pre – Qualified vendors data base if not the business will need to
search for a supplier using purchase orders or research a variety of other
sources such as magazines, the Internet or sales representatives.
Pricing
and Terms
Purchasing departments
continue to offer a range of prequalified vendors a request for quotation (RFQ)
for items or services that it wishes to purchase. The competitive bid process
can produce a range of bids and conditions that the purchasing department will
evaluate and then award the business. This may or may not involve some form of
negotiation. Most negotiated business will involve items or services that are
not necessarily definable by an RFQ. The purchasing department and the vendor
will negotiate more than a price. The negotiation will usually cover what is to
be manufactured or what is the extent of the service to be provided, the
warranty, the transportation services, technical assistance, packaging
alternative, payment plans, etc. Purchasing items or services of significant
cost will require extended negotiations to arrive at a final contract.
Purchase
Order
The purchase order is used
to buy materials between a buyer and seller. It specifically defines the price,
specifications and terms and conditions of the product or service and any additional
obligations.
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