Procurement Process Flow & How to Optimize (The 2024 ...

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Steps involved in a Procurement Process

Procurement process involves several elements, including requirements determination, supplier research, value analysis, raising a purchase request, reviewal phase, conversion to purchase order, contract administration, monitoring/evaluation of received order, three-way matching, payment fulfilment, and record keeping.

Here are the seven key steps involved in the procurement process flow:

1. Step 0: Needs Recognition
2. Step 1: Purchase Requisition
3. Step 2: Requisition Review
4. Step 3: Solicitation Process
5. Step 4: Evaluation and Contract
6. Step 5: Order Management
7. Step 6: Invoice Approvals and Disputes
8. Step 7: Record Keeping

Step 0: Needs Recognition

The needs recognition stage of a procurement process enables businesses to sketch out an accurate plan for procuring goods and services in a timely manner and at a reasonable cost.

Step 1: Purchase Requisition

Purchase requisitions are written or electronic documents raised by internal users/customers seeking the procurement team’s help to fulfill an existing need. It comprises key information that is required to procure the right goods, services, or works.

Step 2: Requisition review

The procurement process will commence only after the purchase requisition is approved and cross-checked for budget availability. In the review stage, functional managers or department heads review the requisition package, double-check if there is a genuine need for the requested goods or services, and verify whether necessary funding is available.

Approved purchase requests become POs (purchase orders), while rejected requests are sent back to the requisitioner with the reason for rejection. All these can be handled with a simple purchase order software.

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Step 3: Solicitation process

Once a requisition is approved, the procurement team will develop an individual procurement plan and sketch a corresponding solicitation process. The scope of this individual solicitation plan ultimately depends on the requirement's complexity.

Once the budget is approved, the procurement team forwards several requests for quotation (RFQ) to suppliers to receive and compare bids to shortlist the perfect supplier.

Step 4: Evaluation and contract

Once the solicitation process is officially closed, the procurement team and the evaluation committee will review and evaluate supplier quotations and delivery times to determine which supplier will be the best fit to fulfill the current need.

Once a supplier is selected, the contract negotiation and signing are completed, and the purchase order is forwarded to the supplier. A legally binding contract activates after a supplier accepts and acknowledges a PO.

Step 5: Order management

A purchase order is issued to the selected supplier either against the newly executed contract / standing agreement / list price. The supplier delivers the promised goods/services within the stipulated timeline. After receiving them, the purchaser examines the order and notifies the supplier of any issues with the received items.

Step 6: Invoice approvals and disputes

This is a crucial step in the procurement process and having procurement software like Kissflow Procurement Cloud gives you a competitive edge over others. With Kissflow, you can perform three-way matching between GRN, Supplier Invoice, and PO to check if you have received the order correctly and if there aren’t any discrepancies. Once three-way matching is complete, the invoice is approved and forwarded to process the payment.

Step 7: Record Keeping

After the payment process, buyers record it for bookkeeping and auditing. All appropriate documents, from purchase requests to approved invoices, are stored in a centralized location.

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