TEN STEPS FOR A SUCCESSFUL PROCUREMENT PROCESS 20 Dec 2023
- The turmoil of the previous two years has given the procurement function a fresh sense of importance.
- Traditional procurement methods cannot be used to track and control risks today.
- Innovative software solutions for procurement have increased efficiency by automating numerous operations.
A company’s success depends on its ability to successfully conduct procurement.
Modern procurement software, however, has replaced the manual procurement function as the more effective method of administering the activity.
By incorporating sustainable purchasing practices and taking into account the needs of the organization and its stakeholders, effective procurement has advanced.
The act of managing methods and processes to get materials for producing completed items based on demand estimates, within a specified budget and schedule restrictions, is generally referred to as procurement.
Effective Procurement: What Is It?
Procurement procedures that work adhere to a set of established procedures. Naturally, these might differ slightly among organizations based on revised rules, organizational size, and the size of the procurement team.
Businesses that have used cutting-edge software for their procurement operations have noticed an improvement in the efficiency of those processes. With prompt, top-notch support, these platforms provide unparalleled data security, scalability, responsiveness, uptime, exceptional performance, and ease of use.
The ten steps listed below are essential for creating a successful procurement process:
- Purchasing Strategy
- Indenting or Purchasing Requisition
- Discover Suppliers
- Publish the RFQ
- Evaluate the Quotations
- Arrange the agreement and sign it
- Publish the Purchase Order (PO)
- Quality inspection and material receipt
- Approval of Invoices and Payment Processing
- Keep Records for an Audit
The initial phase entails evaluating the enterprise-level procurement requirements. The team assesses demand predictions from various sectors and examines expenditures from the prior year (historical data). Additionally, market trends are examined, and risks are evaluated.
Following that, the sourcing strategy and procurement plan for the year are prepared, including the adoption of sustainable buying methods. Finally, the purchase plan is put into action after receiving the necessary procedural, financial, and administrative clearances.
Indenting or Purchasing Requisition:
Any procurement operation that involves an outlay of funds must have the appropriate authorization backing it. The purchase requisition requires approval from the project manager, the end-user department and its head, and the person in charge of approving the budget.
The “Five Rights” objectives—Right Quality, Right Quantity, at the Right Time, Right Place, and Right Price—are achieved by choosing providers in this crucial step. It is critical to evaluate the suppliers’ locations, organizational registration status, reputation and credibility, capacity to reliably complete the order, responsiveness to urgent orders, and ethics. Some businesses also take into account a vendor’s sustainability score.
Publish the RFQ
The list of shortlisted vendors receives the Request for Quotations (RFQ). The RFQ document is complete with all the details a supplier needs to examine and provide an accurate price. When a business wants to get the best deal for its needs, an RFQ is issued.
Evaluate the Quotations
Once all of the quotes have been received, they are evaluated based on factors like the price of purchasing the item, the cost of shipping, the terms of delivery, etc. The aforementioned parameters are summarized in comparison for simple decision-making.
Arrange the agreement and sign it
After the supplier evaluation is completed, a list of vendors is shortlisted and contacted for additional talks. To reduce risks, firms may choose to work with two or even three providers. The parties then draft and execute a contract that has been agreed upon by both.
Publish the Purchase Order (PO)
Once a contract or agreement has been signed, the purchase order (PO) is released to the supplier or suppliers. The supplier(s) for the order are confirmed in this document.
Quality inspection and material receipt
A Physical inspection of the material is done upon delivery. The correct component is examined in the item, and the quantity is confirmed.
The item is then delivered to the authority in charge of inspection for technical validation and spec-compliant quality. If the delivery is accepted, the goods receipt note (GRN) is generated. Any violation of the contract is noted and reported to the provider.
Approval of Invoices and Payment Processing
The three-way matching method is used after the delivery of the items has been accepted; the packing list and supplier invoice are compared to the PO for the terms and circumstances and the GRN to look for inconsistencies. The invoice is accepted and the money is released if no distinction is seen.
Keep Records for an Audit
The organization benefits in several ways from maintaining all the papers, including the policies, budget approvals, RFQ, quotations, comparisons, PR, agreements/contracts, PO, invoices, packing lists, and GRN.
- Fulfil legislative and compliance obligations for audits and filing.
- The records can be used to settle any disagreements.
- When placing the items in a new order, data will be available for reference.
- For using the information when reordering.
The pandemic’s interruption over the previous two years has given the supply chain and procurement activities a fresh outlook.
The problem is made worse by the frequent, swift changes in the environment and markets, which force businesses to adapt and embrace digital transformation.
The tracking and management of risks using human-managed supply chain and procurement activities is antiquated and no longer practical.
The only option is to quickly automate the entire supply chain and procurement process by spending money on the right supply chain and procurement software solutions. Disruptions are here to stay.