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HomeProductsProcurement10 Steps to Create Effective Process of Procurement

10 Steps to Create Effective Process of Procurement

Procurement is the process of acquiring goods and services from external sources to support business’ operations. It is done typically through a competitive bidding process. Depending on the industry and the nature of the procurement, there may be specific regulations or requirements that must be followed to ensure fairness and transparency throughout the process.

An effective process of procurement is essential for businesses to ensure that it obtains the right goods and services at the right price and quality, while minimizing risks. A well-designed one can also increase efficiency and improve overall business performance. This article will outline ten steps to create an effective process of procurement.


10 Steps of Effective Process of Procurement 

process of procurement

An effective procurement process is critical to the success of any organization. It helps organizations secure the resources they need at the best possible value, while also fostering fair and ethical business practices. Here are ten steps for an effective process of procurement:

Start by planning the procurement process

The planning stage is critical in determining the success of a procurement process. It involves defining the procurement objectives, identifying the requirements of the project, determining the budget, and identifying stakeholders. During this stage, businesses need to analyze the market to identify potential suppliers, assess the risk involved, and identify potential challenges that may arise during the procurement process.

Create a purchase requisition or indenting document

Once the procurement objectives have been established, the next step is to create a purchase requisition or indenting document. This document specifies the details of the goods, services, or works required, as well as any relevant technical specifications. Businesses then submit it to the procurement department for further action.

Find and select potential suppliers

The procurement department then identifies and evaluates potential suppliers. This involves conducting market research, creating a list of potential suppliers, and evaluating them based on their ability to meet the requirements. An advanced procurement system provides an online portal for suppliers to share digital catalogs. This step may also involve visiting supplier facilities, assessing their financial viability, and evaluating their reputation.

Send out a request for quotation (RFQ)

Once potential suppliers have been identified and evaluated, the procurement department sends out a request for quotation (RFQ). The RFQ specifies the goods or services required, as well as any technical specifications and pricing requirements. The suppliers then review them and quote accordingly.

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Evaluate the quotes received

After receiving the quotes from potential suppliers, businesses evaluate them based on a set of predetermined criteria. The criteria may include price, quality, delivery time, supplier reputation, and other relevant factors. The procurement department then compares the quotes and selects the supplier that best meets the organization’s needs.

Negotiate and finalize the terms and conditions with the selected supplier

After selecting the supplier, the procurement department enters into negotiations to finalize the terms and conditions of the contract. This may involve negotiating the price, delivery schedule, payment terms, and any other relevant terms and conditions. The parties then draw up and sign a jointly agreed-upon contract.

Issue a purchase order (PO) to the supplier

Once the terms and conditions have been signed, a purchase order (PO) is issued. This document verifies the order’s suppliers. It serves as a legal contract between the organization and the supplier and outlines the details of the goods, services, works to be done, and price.

Also Read: 5 Best Procurement System in Singapore 

Receive the purchased materials and check for quality

When the purchased materials arrive, the procurement department should check the quality and the quantity. This stage involves a thorough inspection to ensure they meet the specifications outlined in the purchase order. If there is any non-compliance, the items are documented and communicated to the suppliers.

Approve supplier invoices and process payment

Once you receive and check the materials for quality, you should approve the supplier invoices for payment. This involves verifying that the goods, services, or works have been delivered as specified in the purchase order. The procurement department then processes payment to the supplier in accordance with the agreed-upon terms and conditions.

Keep accurate records for auditing purposes

Finally, it is essential to keep accurate records of all procurement activities for auditing purposes. This includes maintaining records of purchase requisitions, RFQs, purchase orders, supplier invoices, and payment transactions. Additionally, the procurement department should also keep track of supplier performance to evaluate the effectiveness of the process and identify areas for improvement.

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download skema harga software erp


Creating an effective process of procurement requires careful planning, clear communication, and efficient execution. By following the 10 steps outlined in this article, companies can streamline their procurement process and ultimately achieve better outcomes for their business. However, the process can be time-consuming and complex, which is why investing in a reliable software can be a game-changer.

One powerful tool that can aid in this process is HashMicro’s Procurement Management System. With its robust features, the system automates procurement workflows and enhances visibility into procurement activities.  Schedule a free demo now and see how it can transform your procurement operations for the better.


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Chandra Natsir
Chandra Natsir
A content writer with a strong interest in writing and technology. Chandra is dedicated to writing useful, entertaining, and relevant information for readers, and he continues to develop content that connects and inspires them.

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