The term “procurement” is a familiar jargon for anyone who has any experience working for a large company / organization. Broadly speaking, it is the process of procuring goods and services for a company and/or an organization. Procurement process typically includes planning for the procurement of goods and services for the company’s operational needs as well as raw materials. And also as a way to assess vendor performance.
The Procurement Department
The procurement process is carried out by the procurement department in a company / organization that has the following responsibilities:
1. Planning
When planning the purchase or procurement of goods and services, the procurement staff must make specifications for the goods and services the company needs. In addition, procurement staff must also ensure that the goods and services to be ordered are of the required quality and specification needed by the company / organization. In this process, it helps if requirements are provided in as much detail as possible.
2. Sourcing for Supplier
After procurement planning, the procurement department needs to source a supplier who can meet the company’s needs. The company / organization needs to source as many suppliers as they could, so that they can receive the best offer from the suppliers. At this stage, the procurement department will make sure that each supplier can provide a guarantee to the availability of goods or services, quality, and price so as to qualify for the next step.
3. Tender and Negotiation Process
At this stage, the procurement department begins the tender process by letting suppliers enter their bids. The procurement department then has an option to negotiate on pricing to suppliers or vendors. The goal is to select and award a supplier which can provide the best balance of price and quality.
4. Supplier Awarding
After finding a suitable supplier or vendor, the next task for the procurement staff is to award the tender to a winning supplier and prepare documentations for moving forward.
5. Availability of goods and services
After the purchase of goods and services is made, the procurement department needs to carry out continuous stock and quality control. This is intended so that there is no shortage or decrease in the quality of goods and services that can affect company productivity.
6. Vendor supervision
Finally, the procurement department is also responsible in reviewing and keeping track of supplier performance so that the company / organization is able to procure the goods as agreed, and also as a way to maintain a healthy business relationship with the supplier
The General Procurement process
The following illustrates a typical procurement process in a company / organization:
Requirement Determination
Is the initial stage of the procurement process. After determining what goods and services are needed by each department, the company / organization will create a purchase requisition document. The request list is given to the relevant department or department for further procedures.
Source Determination
After obtaining the purchase requisition documents from all departments, the procurement department looks for eligible suppliers who can fulfil the request. At this stage the procurement department will issue a Request for Quotation / Request for Proposal document for the suppliers.
Supplier Selection
From the list of vendors compiled by the procurement department, one or more suppliers are selected according to the company’s criteria. The selection of vendors is based on the consideration of the availability of goods and services according to the company’s needs, quality, and price offered.
Order Processing and Purchase Order Monitoring
The next stage is to create a purchase order document to the seller that was appointed as the awardee of the tender. At this stage, the procurement department is also tasked with monitoring the purchasing process so that it runs smoothly and accordingly,
Goods Receipt
Suppliers who have delivered the goods and services according to the Purchase Order document then have to submit goods receipt as a proof that goods and services have been received by the purchaser.
Payment
After the goods are received, the financial department of the ordering company or the procurement actor then makes payments according to the agreement agreed by both parties at the beginning of the cooperation.
What happens if the supplier delivers faulty goods? In this case, returns or returns and replacements of goods are carried out according to the agreement stated in the cooperation document.
