It is important to understand the definition of procurement before diving into depth. A clear insight into the procurement solutions will enable you to deal with the supple processes in the best possible way. The term procurement refers to the method of sourcing or hiring the services or goods for a manufacturing company. Some organizations use procurement to define their actual buying affairs; some others consider it for the whole process that may lead up to the purchase.
Generally, procurement is an input to an organization that can be used to procure raw materials and services the manufacturing process needs. Therefore, the success of a buyer’s business depends on the quality of the procured materials at the most competitive rates.
On the surface, procurement may seem a simple process but, in most cases, this is not the case. It is a highly competitive process with great care and attention. It includes several activities:
- Vendor selection
- Payment negotiation
- Strategic planning
- Final selection
- Contract negotiation
- Final purchase
Direct, indirect, & service procurement solutions
Direct procurement is supplying the goods, materials, or services that work as an input for the organization’s manufacturing process. It is a crucial process that directly influences the organization’s manufacturing system. The direct procurement process also influences the quality and price of the final product or service.
Direct procurement is used by manufacturing businesses. Their procurement teams try to create and sustain a stable and strong bonding with the direct procurement vendors.
When it comes to procuring services in IT, it could be a software license. This kind of procurement is usually a one-time process having a one-time brief contract.
Indirect procurement is sourcing and buying materials or services for internal usages. Usually, utility, facility management, and travel industries need this kind of procurement solution.
Service procurement solution is importing and streamlining the contingent workforce and consultation services. This type of procurement belongs to professional services and software subscriptions.
Stages of Procurement
Requirement Identification
First, it is critical to identify the requirements. Otherwise, the project would end up with a mess and the reputation of the organization can also be affected badly.
Marking the Specific Requirements & Sourcing
Among all the requirements, it is important to mark the priorities. After marking priorities, it is easier to move towards the sourcing process.
Negotiation and Finalizing the Contract
Once sourcing is done, both sides will participate in the negotiation. After the final negotiation, the contract will be drafted with the consent of the buyer and the seller.
Purchase Requisition and Order Delivery
In this stage, the purchase requisition will be done, and the final steps of manufacturing will be initiated to deliver the deliverables on time.
Product or Service Inspection
Procured products need to go through a thorough inspection process. It determines the quality of the procured materials or services to ensure the quality of the final product or service.
Payment Process
To clear the payment, the documents stating the order details are scrutinized. If any mismatch is detected, it is resolved before the final approval of the payment.
Recording
Both sides, the buyer and the seller maintain the records of their audits and tax details. This entire process is subject to continuous review to assuring further improvement.
These are the basics you should know before dealing with any type of procurement requirements.