Understanding the Procurement Process

The procurement process has seen a lot of challenges over the past several years. With the supply chain becoming constrained because of the pandemic, finding and buying the products your business needs to survive has become more challenging.

And when 81% of procurement teams feel more pressure to respond and adapt quickly to changes, you need to be on your game when sourcing products and services.

Do you want to learn more about the procurement process and how it helps your business acquire goods and services? Read the guide below to learn how to handle procurement.

What Is the Procurement Process?

Procurement is the process businesses use to acquire goods and services for business purposes. It means defining what you need to operate your business, determining what quality you want to purchase, finding reliable vendors to purchase from, and receiving the required materials in person or by shipping.

You can also be on either side of the table in the procurement process. You can be the purchasing company looking for something to buy. It’s also possible to be on the receiving end and work with other businesses that need to buy what you offer.

How to Handle the Procurement Process

Now that you understand the procurement process, it pays to understand how to do it. Let’s look at the steps to take to find the right products for your business.

Identify What You Need

The first step of the procurement process is determining exactly what your company needs. This can be for various purposes — items you need to serve your customers or products to help maintain your current operations.

You’ll need to do this for every part of your business. Identify your business requirements, your employees’ work, and the best ways to serve your customers.

Once you have those requirements, you can find products that meet those needs.

Submit a Purchase Request

Now that you understand the products and services your business needs, the next step is to submit a purchase request. You don’t want to handle this process yourself. You want to submit all purchases to your company’s financial department.

These are the people you will submit your request to. You’ll notify them of the products you need, the quality you’re looking for, the amount you require, and other relevant details.

Once you submit your request, your purchasing department will log it and put it in the purchasing pipeline if approved.

Find Vendors

Now that you have a list of products to purchase, you need to find a reliable vendor to purchase from. You should have the details in your procurement software, so use your program to generate a quote to send to potential vendors.

Start with the list of vendors you know and trust in your database. Gather their quotes and compare them to see who offers the best deal.

If you don’t find what you need with your current suppliers, you’ll need to branch out to find new vendors. Do a little research to find other reputable vendors and reach out to business contacts to learn the suppliers they trust.

Negotiate Prices

Once you send a quote request to your vendors, you should start getting in quotes for purchases. Don’t just accept the first quote you see. Look at your options to see if there is any wiggle room with the price.

This is especially true if you get several quotes from great companies. You may have a company preference but find that another vendor offers a better price. You may be able to negotiate down the price at your preferred company to save cash.

Look at all your options to see where you can find savings without sacrificing quality.

Create a Purchase Order

It’s time to make an order once you negotiate a reasonable price with a vendor. This process means creating an internal document in your organization that details the information related to the order. Once you sign off on the internal purchase order, you’ll send it to the supplier fulfilling the request.

Make sure to include all the information about the order in your purchase order to the supplier. Include the price, order amount, product SKUs, and other relevant information.

If you have any special terms, ensure they are clear on the order. Doing this will help avoid errors that lead to wrong orders.

Review the Shipment

After some time, you should get the shipment of the products you ordered. However, you shouldn’t just place the products in your inventory — you need to review what you purchased to make sure everything is as it should be.

You should have a quality control system in place. Use it to examine your received goods to make sure everything is up to standard.

If it isn’t, let your supplier know so they can review what happened and take corrective action.

Pay Your Suppliers

Paying your suppliers is the final step in the purchase procurement process. Once you verify the quality of your goods and the quantity you were supposed to receive, you can send the payment to your suppliers.

Once you send your payment, you can close the purchase order in your software for procurement. Once you finish this process, continue to the next item and start the procurement process again for the other items you need.

Optimize Procurement for Your Company

It’s hard to run a business when you don’t have the products and services you need. You’re stuck trying to build things from scratch instead of relying on vendors to offer you a shorter way to serve your customers.

That’s why understanding and optimizing the procurement process is so important. When you do, you can find reliable suppliers to send you quality products when you need them. Now that you’ve read the guide above, you should have what you need to stock your business.

Do you want to learn more about tackling other elements of the business world? Check out the blog to find more helpful business advice.