.webp){kind=small}
.webp){kind=small}
.webp){kind=small}
.webp)
Procurement management is not a simple task. In an organization, numerous procurement requests are made, and keeping track of them is crucial. Sometimes fraud also occurs in the procurement process. The procedure through which any products or services are bought from an external source for the firm is called procurement acquisition. The purchased items should be obtained at the best possible cost and should closely match the organization’s requirements. This means the best possible quality, quantity, timing, and location for the cost incurred.
What Is the Procurement Process?
The procurement process typically includes all details and spans from the planning work involved in the requirement (demand) procedure, the evaluation and calculation of alternatives, approval and disapproval, bill creation, payments, and record-keeping. There are always ethical concerns within procurement. Therefore, both public and private organizations often strive to create clear and defined processes to ensure fair, open, and unbiased procurement without the risk of fraudulent activities.
According to PSM Market Research, “The global retail sourcing and procurement market was valued at $2,782.2 million in 2017 and is forecasted to witness a CAGR of 11.6% during 2018-2023. Rising demand for centralized procurement and growing need for increased visibility in the supply chain are key factors driving market growth.”
What Are the Steps for Streamlining the Procurement Process?
In every organization, procurement process steps may vary according to their business model type. Here are the steps for streamlining procurement!
1. Identify Requirement
In the first step, a requirement is identified by an employee or department. When employees feel a need to complete work, they inform the manager by filling out a form. The manager approves it after review, then forwards the request to the finance department. The finance department checks the budget; if insufficient, the request is disapproved, otherwise, it is approved.
2. Evaluate Vendor
You must find a vendor who delivers a quality product on time and understands the value of time. It is important for organizations to first identify their needs and look for expected providers for the inventory items. The assessment process varies widely and can be as simple as a quick web search. The goals of this stage are clear—evaluate vendors based on price, quality, reputation, reliability, customer service, and other relevant criteria. Procurement selects the best vendor after completing this analysis.
3. Negotiate with Vendors
With an idea of potential providers, they are approached through methods like requests for proposals, quotes, and information. Communication can be direct or through mass marketing like newspapers or trade publications. There may be a need for clarification of all expected services and given, as well as the possibility of sample testing or trial runs. Negotiation is a critical phase, involving discussions on price, availability, timelines, and customization options. Service level agreements and contracts are drawn up and signed.
4. Release Purchase Order
When all the above steps are organized and everything is in place, you approve some purchase requisition forms and release the purchase order. This purchase order will contain all the information a supplier requires. After the products arrive, the quality is checked, and payment is made as per the contract.
How Asset Management Software Assists in the Procurement Process
Asset management software assists in the procurement process by keeping track of each procurement order and providing status updates. Whenever a new procurement order is created, you will be alerted. Furthermore, you can keep track of each order in detail, centralizing information and ensuring accuracy in data and analytics. Precise data makes inventory level optimization simple.
Automated software also reduces human errors by providing inbuilt templates, decreasing spreadsheet utilization and maintaining accuracy. With this software, you can monitor vendor performance, such as delivery time and product quality. If issues with a vendor arise, you can look for alternatives, and this information is easily stored in the software.
Conclusion
Modern tools such as asset management software significantly enhance the procurement process. This software provides updates on each procurement order, including packaging status, warehouse departure, and delivery tracking. Payment status for each order is also monitored. Once the organization receives the product, quality and quantity checks are performed, and payment is made as per agreements.
This software helps avoid fraud and scams within organizations and offers many advantages, including detailed reporting. Asset tracking allows for the monitoring of assets, ensuring efficient management and utilization.
Frequently Asked Questions (FAQs)
What is a purchase order?
A purchase order is a legally binding document that outlines the required product details and quantity. After the purchase requisition form is approved, the purchase order is created by the purchasing department.
What are purchases and requisition?
A purchase requisition is a document in which an employee or department seeks permission to buy a product on behalf of the organization to fulfill work. This document contains product details, vendor name and details, date, name, and purchaser details.
What are the benefits of Purchasing Order (PO)?
One of the major benefits of a Purchase Order (PO) is that you don’t have to pay the full amount in advance although you can receive a complete purchase order. With just a token amount, you can get inventory, and the rest amount will be paid later or as per the contract.
.png){kind=small}
