The process of acquiring goods and services is called procurement. As simple as it may sound, procurement is a long process. Apart from making big losses, the business may also collapse if the process of procurement is not done correctly. The process begins when the company gets the need for a commodity. The process may extend to the time final audit is done.
When done properly, procurement can give one company a competitive edge over others. A company with a performing procurement department enjoys a myriad of advantages. Doing good procurement has advantages as stated below.
Number one, good value for the company’s money is made. Gains made are measured against the expenses made during procurement to establish this. Evidence of properly done procurement can be derived by comparing the gains with the expenses incurred during a procurement process.
If you know how this department works then you can be able to assess its performance. The process involves eight or nine steps. The initial step involves agreeing on what the business needs -be it goods or services. The main area of specialty of the firm is what gives this information. When plans for acquirement of the commodities are made, this step ends.
Next, decide on what standards should be looked for in goods being bought. This will give a bearing on the cost implications to the company. Substandard goods, though cheap, initially have extra costs like repairs and replacements.
After determining the right standards of goods and services, a research on the best suppliers is made. The process is sometimes referred to as market research analysis. Possible research on sellers or paying them a physical visit can be used here. Tendering is done during this step.
Analysis of given values from the research is what follows. The quoted costs of applications on tenders or research data is compared. The most feasible tender application is then selected for the supply.
If this next step does not succeed, the whole process may close. The stage involves looking for funding. Here budgetary plans are forwarded to the finance desk. Money is availed to the department once the proposals go through.
Goods are ordered once the department receives the funding needed. In other times, there may be some negotiations with the supplier. Good negotiations at this stage may see the supplier give the firm a good discount.
Release is the final stage of the process. From the supplier, goods find their way to the company’s stores. The flow of goods from the warehouse to the different departments is also the work of this department. This is crucial since it helps in inventory keeping of the goods as they come and leave the stores. Doing this solves many would be tussles when auditing is done.