If you want to achieve success with your projects, you will have to implement smart procurement practices. Previously, procurement was done manually and comprised a lot of issues, which led to high processing costs and lost documents.
Additionally, late payments, poor management, and inefficient dispute resolutions were a few reasons for poor supplier relationships. So, you need to have a plan for procurement management, which can help control spending, track purchases, enable growth, and create opportunities.
Well, if you want to know more about procurement, its benefits, and its process, you can keep reading this article.
What are the benefits of procurement management?
Procurement management optimizes and manages organizational spending. You can acquire quality products and services before the deadline or within the stipulated budget with this management process. Well, to know the advantages of this process, you can read below.
- It can reduce costs: One of the prime benefits of this process is getting your orders at a lower rate or inexpensive cost. The best planner will make sure that all the products will be sourced strategically and the time of the purchase will be decided.
Well, the cost of a few products or goods becomes cheaper because of excessive production. After all, you can buy them when the goods become economical. You can also buy a particular product before the deadline at a lower rate.
For instance, you require raw materials for a specific product; you can purchase them before the deadline, maybe six months before production or sales starts. If you buy the raw materials at the last minute, the cost can shoot up.
- It helps in future strategic planning: In case you are using the procurement strategy for the first time, you might make a few mistakes until you get it right. There might be delays in production or getting raw materials from suppliers.
So, you need to consider optimum utilization of resources and acquire them at the right time and price. Hence, it is critical to plan strategically for the procurement process in the future.
- It is efficient and transparent: In case you already have a strategy in mind, you might very well plan your budget accordingly. But what if something goes wrong? Then, you must find a solution.
For instance, if the supplier is unable to deliver the goods or raw materials, you have to find another supplier immediately. So, you must plan accordingly so that the procurement process won’t be halted. In this manner, the process can be transparent and efficient.
What is the process of procurement?
The procurement process differs depending upon the needs and structures of the company. Keep reading this article to learn the steps of the process.
- Identify the services and goods the company requires: The business must identify the company’s services and goods. How many materials are required? What are the precise specifications? These questions must be asked. You can also consult different business departments that can help you decide on procuring certain items.
- Submit order request and select the vendors: In a business, your purchase or order request for certain products or raw materials will be sent to the procurement team. They will ensure all of your details will be considered and approved.
After assessing a few vendors, they will request for quote (RFQ). And the vendors will be chosen for the cost, reliability, reputation, and speed. In case the cost is exorbitant, you can also negotiate the terms and prices.
- Create the purchase order and inspect the delivered goods: A purchase order will be created after selecting a supplier or vendor. The vendor will deliver goods, which will be inspected for any damage.
4. Conduct three-way matching and approve invoice: The procurement management team will compare the purchase order, packing list, or order receipt and invoice. In case of any inaccuracies, they will have to report them immediately. But what if it is accurate? They will approve the invoice and begin the payment process.
