Procurement exists across every business in the world. It is inevitable, for all organizations. In terms of operating and aiding the expansion of their performance to their clientele, businesses obtain various goods and services from external suppliers. This particular process is referred to as “procurement”.
To be able to harness the power of globalization and streamline their procurement process most effectively, they need to work with the best suppliers at the best possible price. Procurement, ideally, helps its organization achieve its tactical and strategic goals. The definition of a procurement process is a series of steps that an organization identifies and follows in order to obtain goods or services for their own goals and objectives. This definition is broadly and widely fulfilled by companies and suppliers, by manufacturers of goods and services and the consumers of those goods and services, on industrial scales, in industries as diverse as medicine and industrial commodities, automobile parts and finished iron goods.
How Do Procurement Processes Help?
In today’s world of changing trade laws, economic instability, political instability and the like, a well-defined, carefully-managed procurement system can help organizations manage their supply chain and other associated risks. By being involved in managing such risks as financial, operational, contract risks, and the like, a procurement process prevents supply chain disruptions that may interfere with profitability.
Periodic assessments of the procurement process are necessary to identify its strengths and weaknesses and determine whether or not their suppliers continue to be the best for their needs. By focusing on supplier relationship management, both parties create a synergy that results in high propositions that provide maximum value to everyone involved. This synergy is crucial to accommodating a significant workflow throughout the procurement process.
How Does An Effective Procurement Process Work?
An effective procurement process unfolds over seven specific steps. They are:
- Identifying the requirement for goods and services from all areas of the business.
The procurement cycle begins whenever any of the areas of the business needs outside resources. From Post-Its to PPE, these items all fall under Procurement. This way, visibility into the areas that will require spending increases, as well as areas for cost savings.
2. Evaluate a list of suppliers.
Once these business areas define their requirements, the next step is to appropriately identify a list of potential vendors who may supply the goods and services needed. This may involve something as simple as a web search or be taken through more structured measures. The point is to identify relevant suppliers and evaluate them based upon a series of metrics to determine how well they may fit your needs. Determining those metrics carefully and ensuring they are well-defined for your needs is vital to establishing their fit with your company. After evaluation, the company that fits your needs best wins your deal.
3. Negotiate the contract
Contracting is crucial for any organization in terms of maximum value creation and collaboration with your chosen supplier. This means assessing factors such as pricing structure, terms and conditions, timelines of delivery, scope of the work involved, and the like. Detailed analytics and negotiation of contracts are valuable in terms of cost savings opportunities and dynamic discounting.
4. Raise a purchase requisition and release the purchase order
A purchase requisition gives a description of the good or service, pricing and quantity as needed, supplier information, and approval workflow. Once this is approved, a Purchase Order will be released to the supplier.
5. Complete the payment process upon receiving an invoice.
When the supplier receives the PO, they send an invoice including the agreed upon price. The procurement team matches them to ensure quality and quantity. Depending on the agreement with this supplier, the payment may be sent before or after the product is received.
6. Receive and audit quality
Any items or services received should be quality-checked for integrity, and to ensure the supplier has met the agreed-upon expectations. These expectations should have been covered and agreed upon by both parties during the contract negotiation.
7. Maintain proper record-keeping
It’s best practice to store invoices in a methodical, easy-to-access manner in order to effectively track spending and various expenditure categories.
Wow, that sounds like a lot of work! Many companies aren’t in a place to evolve a procurement department, or would simply rather work with those who are already professionals in the field, have the ties they need with suppliers, and can get what they need, where they need it, on a regular basis.
This is where KWest comes in. Unlike other procurement service companies, we cater to more boutique services. Think smaller arrays of products within fewer industries. We do this so that we can specialize. We also do this because it allows us to maneuver within our supply chain to get you the products you need. If you’re looking for the experts within the procurement industry, look no further. You’ve found us. You’ve found KWest.