Procurement, in one way or another, is involved in all business organizations. This is the way that businesses get their hands on the various items they need from outside suppliers. Everyone who runs a business has to have some process set in place when it comes to procurement. Generally, businesses will work with local suppliers and smaller shops to get the best possible price for their goods. There are seven vital steps in the procurement process, which is essentially a series of steps that your organization can identify and follow to obtain products. Information on how the process works are important, especially for those new to the game in order for manufacturing procurement to take place without issue.
Step One: Need Identification
This is where the process starts. When an organization identifies the need for goods and services, it is time to begin looking for an external supplier. In this step, manufacturers will simply identify and consolidate their needs in order to begin different analysis steps ahead.
Step Two: Find Suppliers
Once the needs have been identified, it is time to create a list of potential vendors. This process is simple, just do some quick Google searching and compare options. You want to find and stick to vendors that are relevant to your brand, and will also keep you from breaking the bank.
Step Three: Contracts
Once you have selected the supplier you are going to use, the next step is to comprise and negotiate contracts. This is where you will set the prices, timelines, terms, and conditions, etc. It is important to be as specific as possible in this stage.
Step Four: Purpose Requisition
Now that contracts have been finalized, the next step is to raise a purchase requisition which essentially is a description of the pricing, supplier information, and workflow.
Step Five: Payments
Once the purchase order has been delivered to the supplier, they will send an invoice with the final pricing. Depending on the terms agreed upon between suppliers and organizations, the payment will be required either pre or post-delivery.
Step Six: Receive
Once all terms have been met per the contract, the supplier delivers the products to the organization. Companies will then audit the delivery to make sure everything is in order according to the contract.
Step Seven: Invoices
Once the delivery has been received, it is important to store all invoices correctly and in an organized fashion in order to track expenses and inventory correctly within the system.
Having a procurement process in place is the best way that organizations and manufacturers can stay on top of their inventory needs. The process is fairly simple but incredibly important for businesses to thrive in today’s high demand market. Business owners rely on this process in order to supply their organization with its products, and keeping the system running efficiently is the best way to avoid procurement blunders and mixed up orders. The success of your business depends on how you handle your financials, and this process is a huge part of that, so it’s time to begin thinking about how you can revamp your process.
