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      HomeProductsProcurement7 Steps of an Effective Procurement Process and How to Improve it

      7 Steps of an Effective Procurement Process and How to Improve it

      The term “procurement” describes business operations or procedures for getting products or services from the preferred vendors at the best prices. Finding the best deal on resources is the main goal of the procurement process. Among the things acquired are raw materials, equipment for the workforce, supplies, furniture, travel-related services, and a wide range of other things.

      Each business defines procurement differently. It is referred to as the process of issuing purchase orders and paying for them by some businesses. Other businesses, on the other hand, see the procurement process as including every step of the procedure, from identifying company needs to finding suppliers and monitoring the delivery of items. 

      A company may really spend more on goods and services than it brings in. Clearly, it is an important step in understanding the supply chain since it supports businesses in selecting reliable suppliers that can offer competitively priced goods and services to meet their needs. For instance, cutting purchasing costs will have a significant direct impact on the profitability of the company.

      However, if the purchase price is excessive, the supply chain may have an impact on both the company’s profitability and reputation. By cutting costs, this will improve a company’s procurement procedure. The company must also choose suppliers who meet the firm’s requirements for high-quality products and services and have the capacity to deliver on a regular basis.

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      Table of Content:

        Steps in the Procurement Process

        There is no such thing as a “One Size Fits All” purchasing process. Based on the needs and goals of your organization, you must determine the steps that fit effectively. You must take into account several different procurement-related factors, some of which may not apply to your company or industry. To create an effective procurement process flow, follow these seven steps:

        Identify the needs of all business unit

        The identification and consolidation of the requirements of all business divisions in a company is the first step in the procurement process. This gives insight into the spending categories and areas so that cost-saving opportunities are still recognized through spending analysis. Additionally, this assists the organization’s budgeting procedures and future spending projections.

        Identify and evaluate a list of suppliers

        The next phase in the procurement cycle is to compile a list of potential vendors who could provide the goods and/or services after the business units have determined their requirements. Simple web searches or more formal procedures like RFPs, RFQs, and RFIs are used in this process. Evaluating potential vendors is the goal of this step in the procurement process. The supplier who provides the greatest value at the best market price wins the contract after the assessment is complete.

        Choose a supplier and negotiate contract terms

        The contracting procedure starts once a provider has been chosen to meet an organization’s needs. For a business to create the most value and encourage supplier-buyer cooperation, contracting is an essential step. In this step of the procurement process, important criteria including cost, the scope of the service, terms and conditions, delivery schedules, etc. are evaluated.

        Raise a purchase requisition and release the purchase order

        The next step is to issue a purchase requisition (PR) when an organization completes its contract with a supplier. A PR contains details on the product or service, the cost and quantity, the provider, and the approval process. The purchase order (PO), which includes details such as the PO number, payment terms, supplier information, etc., is released to the supplier after a PR is approved by the finance team.

        Related article: 5 Best Procurement System in Singapore

        Complete the payment process upon receiving an invoice

        After receiving a purchase order, the supplier delivers an invoice outlining the cost of the requested goods or services. The procurement team checks the invoice for authenticity with regard to quantity and quality when the business receives the PO and their invoice before releasing payment. The payment is released either before or after delivery, depending on the payment terms agreed upon by the company and its suppliers.

        Receive and audit delivery of requested goods/services

        Based on payment and the conditions of the contract, the supplier provides the products or services. Companies should conduct an audit after receiving goods to make sure the suppliers meet their quality standards. A study of the supplier’s records and on-site examinations of the delivered goods or services should be part of the audit procedure. The audit’s objective is to verify that the supplier has fulfilled all contractual obligations and that the goods or services are of the required quality.

        Keep accurate records of vendor invoices

        It’s critical to properly store the invoices after receiving a delivery. This will make it easier for the business to keep track of spending categories. Invoices can be kept in a variety of ways, either online or physically in files. Whatever method is selected, it is essential to store all invoices in a uniform way. This will make it easier to keep track of expenses in an efficient and effective way.

        download skema harga software erp
        download skema harga software erp

        How to Improve Procurement Process Using Procurement Process Software

        Any organization’s procurement procedure is essential. It involves buying products and services coming from external vendors. There are a few things you can do to optimize the procurement process. You should first create precise and detailed requirements for the products or services you require. This will make it more likely that you will receive your desired outcome. Second, you must request quotes from various vendors. You may then compare costs and select the one that is ideal for your business. Last but not least, you should have a solid contract with the seller. In the event that there are any issues with the offered goods or services, this will protect your business.

        A number of tools can be utilized to optimize the procurement process. Software for procurement management is the most crucial instrument. With the use of this software, businesses may monitor and optimize their procurement procedures. E-procurement platforms and source management systems are additional instruments that can be utilized to optimize the procurement process.

        Related article: The Importance of Procurement Software for Singapore Company

        How to Choose the Right Procurement Process for Your Business Solution

        procurement solution

        Quick implementation

        It’s more difficult than it seems to implement a procurement solution. Despite any technical difficulties, no one will initially embrace the change, especially if it is difficult to learn. The greatest and most appropriate procurement solution can assist speed up the implementation process so that it can go live in a matter of days, saving both a significant amount of time and money.

        Instant customer support

        In any software, technical issues are all too common. Make sure the seller provides timely, good customer service. Compare several providers based on their responsiveness, mean time to resolve support tickets, and availability of self-service tools like a current knowledge base.

        Evaluate features and plan customizations

        Start by making a list of every feature in your current procurement system after taking a demo. Set out qualities that are necessary from those that are desirable. Discuss the requirement functionality after this is finished. You can move forward with a purchase if the post-customization fee is reasonable.

        Choosing the right procurement software is crucial for optimizing these aspects. For detailed guidance on selecting the best procurement software, read our comprehensive article on Choosing the Right Procurement Software for Your Business.


        With significant commercial influence, procurement is becoming a strategic activity. A crucial corporate requirement is a set of efficient and well-designed digital procurement processes. Transactional process automation serves as the core of a digital procurement strategy and provides access to high-impact technologies like ML and AI.

        Tools, technologies, and procedures will continue to evolve. There are trends and circumstances that urge you to adapt. So, despite everything you’ve accomplished, try not to become too comfy. Continue to learn, and if required, make adjustments. You may also use HashMicro’s Procurement Software to make buying for your business more efficient. You can manage all buy requests from every branch, better control procurement costs, and negotiate the best prices with vendors using just one system.

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