Procurement process refers to the identification and implementation of certain steps in a business ensuring success in acquiring goods and services to meet the requirements while achieving certain objectives. It is a very clear fact that every organization or business has a unique procurement process. But, to understand the variables of the process of raw material procurement, we need to go through the most common steps found in it, which are as follows :
Identifying the demand
The very first step of buying something is to recognize the fact that there is a need for it. This might involve purchasing a new item or reordering something for a business. At this stage, it is very important to consult the stakeholders to prevent any issues that might arise later in the strategic sourcing of the procurement process.
Identifying the specifics of the demand
Once the process of determining the need of the specific item or service has been done, it is important to discuss all the detailed specifics with all the departments involved, which will prevent any mistakes from happening further in the procurement process.
Research and sourcing
The next step in the procurement process is to perform a thorough research to find the best sources that supply that item. New suppliers need to be thoroughly investigated to get the right price, quality, and quantity. Later, approval from the relevant sources, options and costs can be compared, and the best option can be chosen.
Negotiating and finalizing the price and terms
After selecting the best prospects to procure the materials, quotes are sent to the shortlisted vendors and then negotiations are done after which both the buyer and seller reach a middle ground and sign the deal. It is always easy to have better prices from a single seller if you are ordering a large number of materials.
Purchase requisition and order
This is the final step of any procurement process. The purchase requisition that is generated is approved by the appropriate authority in the company. This is an important stage because both the buyer and seller need to know and understand the specifics of the order. Here, the specifics are compared to the price quote, and terms and conditions are made so that there is complete transparency between the two parties.
The shipment notice is sent by the seller to the buyer wherever it is applicable. The delivery can be completed in person or by any other means as specified in the order agreed upon by both parties.
This stage involves creating a timeline for the prompt delivery of goods without any unforeseen delays. This might include information on payment and delivery schedules.
After the item is delivered the buyer must thoroughly inspect and match the listed items with the purchase order. The buyer has the right to either approve or reject it. Both of these actions will trigger an action as mentioned in the terms and conditions agreed upon by both parties.
At this stage, the documents related to the order are read thoroughly. The specifics of the order, receipt of items, payment request invoice, etc are compared and after the ratification of mistakes if any, the payment is made through the modes which had been agreed upon by the parties beforehand.
Both the parties keep a record for auditing and taxation in the procurement process. Through this, they can also review the whole process so that certain improvements can be made in the process to make it even better the next time.