One of the most crucial elements for businesses is the procurement of goods and services. This process aims to acquire products or services that support business operations. Given its importance, procurement follows a structured sequence of steps. What are the different types of procurement, and how does the process work? Read on to find out.
The procurement process is a series of steps undertaken by an organization to obtain goods or services necessary to achieve its operational objectives. It includes identifying needs, selecting suppliers, negotiating contracts, and managing supplier relationships. Effective procurement is not just about purchasing but also optimizing costs, ensuring quality, and managing risks within the supply chain.
Every company has different standards for procurement, but in general, here are some key aspects to consider:
There are several types of procurement commonly implemented in organizations:
This refers to procuring goods or raw materials that are directly used in production or essential business operations. Besides raw materials, direct procurement also includes production machinery and finished goods intended for resale.
This involves acquiring goods or services that do not directly relate to production but are necessary for business operations. Examples include technology, office supplies, and cleaning services.
This covers the acquisition of physical products required by a company, whether for resale or internal business operations. Examples include office furniture, supplies, or software.
This involves hiring professional services or external labor to support business operations, such as consulting services, cleaning, security, or employee training.
An effective procurement process generally involves the following key steps:
The procurement team or relevant department determines the required goods or services, including specifications and quantity.
The requesting department submits an official document requesting the procurement of specific goods or services to the procurement team.
After compiling a list of needed goods or services, the procurement team evaluates and selects vendors based on criteria such as pricing, reputation, product quality, delivery capabilities, and accountability.
The procurement team formally requests price quotes and other terms from selected vendors.
The procurement team negotiates with vendors regarding price, payment terms, delivery schedules, and other conditions before signing a formal contract. This is a crucial phase to ensure that the company obtains the required goods or services at the best value.
The procurement team issues an official document detailing the items or services ordered, including quantity, price, and other terms.
Upon delivery, the procurement team inspects the received goods or services to ensure they match the specifications and quantity ordered. This process involves three-way matching, verifying consistency among the purchase order, delivery document, and invoice.
The company processes payment according to the agreed terms once it has verified that the goods or services have been received as expected.
Even after receiving the goods or services, documenting and evaluating procurement performance is essential. Keeping records of all procurement documents, such as purchase orders, delivery receipts, and invoices, facilitates internal audits and improves future procurement processes.
The procurement process involves numerous documents, making the signing process a crucial aspect of agreements. VIDA offers a digital signature solution that simplifies and secures this process.
VIDA’s digital signatures accelerate procurement workflows by allowing documents to be signed digitally, eliminating the need for face-to-face interactions with vendors. From a security perspective, digital signatures make it easier to verify the identity of signers since they include Electronic Certificates. This means procurement documents cannot be easily forged, as important details about the signing process can be tracked.
By understanding and optimizing each step in the procurement process and leveraging technology such as digital signatures, companies can enhance operational efficiency, minimize risks, and ensure compliance with applicable regulations.
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