Mastering the Procurement Process: A Step-by-Step Approach

Posted on Feb 6, 2025 in Business Administration and Innovation Management

The Procurement Process

Provisioning keywords are “cost”, “quality”, and “time”. When a company needs to purchase goods or services, it must take steps to find suppliers that manufacture or sell the materials. An analysis of the bids received must be made to select the supplier, negotiate the purchase, etc.

The purchasing process includes the following phases:

  1. Planned Purchases: This consists of making a prospective study of needs. In this way, you can learn about the products on the market and be prepared before the need arises.
  2. Analysis of Needs: Shopping is generally centralized in the purchasing or procurement department. It receives bulletins and application materials from various internal users (manufacturing, warehouse, sales, etc.). The priority of requests is analyzed to process management.
  3. Application of Bids and Budget: In the case of a high-cost purchase or when first acquiring a product, the RFP (Request for Proposal) and budget are necessary steps to avoid decisions that may negatively affect the business economics.
  4. Evaluation of Offers Received: After receipt of bids, they must be studied, analyzed, compared, and reviewed.
  5. Selection of Provider: Factors compared during the selection are price, quality, conditions, and personal guarantees of the company that supplied the product.
  6. Negotiation of Conditions: During this phase, some points of the offer that may be negotiable are discussed and specified.
  7. Application of Order: When the buyer and seller have reached an agreement, a document that commits both parties must be drawn up.
  8. Order Tracking and Agreements: Monitoring is done to verify that all required material has been received, which corresponds to the characteristics detailed in the order and has been delivered on time.

The process can vary from one company to another due to the main activity (industrial, commercial, or services). The industrial company focuses its purchases on industrial materials used to manufacture the product. These components are many and varied, and it is necessary to adjust the maximum value for raw material price to avoid raising the final cost. The trading company, for its part, seeks to obtain the product at a competitive price, due to strong competition between companies that conduct their sales to final consumers. And finally, for the service provider, the variable is to satisfy customer needs, providing the means to meet the objectives.


Needs Analysis in Procurement

The purchasing department, after receiving the newsletters, classifies them appropriately. The process is usually as follows:

  • Give preference to applications for materials whose stocks are at rock bottom.
  • Check if the item is used regularly or if this is an article that first-time buyers are purchasing.
  • Sort newsletters for homogeneous materials for items, materials supplied by several suppliers, or imported products.
  • Consult with the future user before ordering.

The next step is to decide the quality to be met by the materials, the amount that must be requested, delivery time, financial conditions, etc. When manufacturing, warehouse, and sales sections are involved in supply, the answer to questions like how much to buy, when to seek the order, and at what price are generally resolved in the technical department or the sales department.

Conditions that are taken for the quantity of each order, or whether to make a single order in installments, will affect the rest of the procurement process, so it uses information from the files of the company, along with the storage system, the purchasing policy, and the economic situation.

Request for Proposal (RFP) and Budget

The phase of bids and budget request is made in the following cases:

  • When you first start the activity.
  • When you have to buy a new product.
  • When you’re not happy with the current vendors.
  • To expand the portfolio of suppliers.
  • To respond to recent publicity.

Because the petition process offers an economic cost, we will ensure to send the request only to providers whose response included an offer of interest.

Depending on the procurement policy adopted by the company, there are several factors that influence when deciding to buy from the manufacturer, wholesaler, or both, which are:

  • The type of product.
  • The amount requested in each order.
  • The location of the store.
  • The services offered by the supplier.