32.2 C
Thursday, April 18, 2024
HomeProcurementKey Stages of the Procurement Process

Key Stages of the Procurement Process

Utilizing a proper procurement procedure is vital to all companies and businesses a success which involves seven key stages with several methods to benefit organization’s financial budgeting. Good practice of procurement process can be achieved by performing a supply market analysis to recognize market competitiveness and characteristics, advantages from suppliers, delivery times, and generates reasonable pricing for specific goods or services to the company. This article explains the key stages of the typical procurement process.

Requisition for Purchases

A purchase requisition is something like a request form for the internal employee within the organization uses to request the purchase of goods or services to the procurement team. In general purchasing process needs to be reviewed and granted approval for internal permission before the sourcing. Once a requisition is approved, purchase orders can be requested for the internal accounting system and expedite record-keeping and sent to the vendor. A purchase order requires certain information like the order number, name of the purchasing office, payment terms, items to be purchased, & ship to address to trace the exchange of goods and services. When the goods or services are delivered by the supplier, the receiving team checks the order for quantity and quality, the purchase order number, packaging slip or order receipt, and invoice to confirm the accuracy of the purchase order. This ensures that the finance or accounting department is paying only for the items that they have ordered and received, and without any discrepancies.

Sourcing for Suppliers

The sourcing process is central to cost structuring, profit margins, and competitiveness for businesses of all sizes. It’s important to possess a business partner which needs to be someone who can intact and someone who can trust now and in the future. By selecting the right suppliers there will need to be considered as the quality of the product, price offers, and lead time of the purchase of goods or services from suppliers. Sourcing strategic benefits to both buyers and suppliers. Purchasers can negotiate lower unit pricing for high-volume purchasing which reduces the company’s costs of goods and keeps retail prices competitive. Suppliers can have the outlet of their goods consistently which makes dependently on cash flow planning.

Negotiating Contract Terms

Negotiating a contract is the process of an agreement on a set of legally binding agreements on the terms for both parties to seek to obtain favorable terms and minimize financial, legal, and operational risk. After selecting a supplier to work with, it needs to list down the contract term and conditions in a mutually satisfactory agreement between both parties. It helps lower the chances of unexpected situations happened between buyers and suppliers to ensure a timely response according to the contract negotiations. Every negotiation between buyers and suppliers is unique and requires its solution. By knowing one another with new information from the negotiation process, constructive discussions can help to enhance the understanding of both parties in a mutual agreement. It is also about the right attitude and intention being diligent in the preparation, planning, and specifically thinking through the objectives.

The objective of contract negotiation is for all parties to feel comfortable with the details of the contract. The contract negotiation process for both parties will assess their responsibilities, rewards they will expect from entering the contract, and any risks they assume. The objective of contract negotiation is for all parties to feel comfortable with the details of the contract.

Finalizing the Purchase Order

An order confirmation sent from the supplier to the buyer confirms that the order has been received and accepted. After the order is made, buyers need to provide the details of the reference number, description of the goods or services, total costs, quantity, payment terms, and other key information to vet through their internal approval workflow. Typically, this occurs when an invoice is issued to suppliers and marked as “final payment” and being processed under Accounts Payable. A final payment indicator is going to be sending over to the company’s finance department as an open liquidation for any remaining encumbrance to close the PO.

The full content is only visible to SIPMM members

Already a member? Please Login to continue reading.


Ashish Deshpande. (2020). “Purchase Requisitions: The Definitive Guide”. Retrieved from https://www.frevvo.com/blog/what-is-a-purchase-requisition/, accessed 18/09/2021.

Eve Koo Fong Wei, DPSM. (2021). “Analysing the Supply Market for Effective Procurement”. Retrieved from https://publication.sipmm.edu.sg/analysing-supply-market-effective-procurement/, accessed 19/09/2021.

Gurram Gopal, SCB Contributor and Beatriz San Miguel. (2018). “Here’s Why You Should Pay Attention to Your Expedite Process”. Retrieved from https://www.supplychainbrain.com/blogs/1-think-tank/post/29111-the-importance-of-paying-attention-to-your-expedite-process, accessed 18/09/2021.

Hasnah Binte Mohammad Ali, DPSM. (2021). “Essential Documentation for Procurement Process”. Retrieved from https://publication.sipmm.edu.sg/essential-documentation-procurement-process/, accessed 19/09/2021.

Linda Teo Seow Yian, DPSM. (2021). “Negotiating Essential Clauses for Purchase Contracts”. Retrieved from https://publication.sipmm.edu.sg/negotiating-essential-clauses-purchase-contracts/, accessed 19/09/2021.

Martina Marof, DPMM. (2018). “5 Critical Strategies for a Successful Procurement or Purchasing Negotiation”. Retrieved from https://publication.sipmm.edu.sg/5-critical-strategies-successful-procurement-purchasing-negotiation/, accessed 19/09/2021.

Sylvia Lee, GDPM. (2018). “Key Success Factors for an Effective Procurement or Purchasing Process”. Retrieved from https://publication.sipmm.edu.sg/key-success-factors-for-an-effective-procurement-or-purchasing-process/, accessed 19/09/2021.

Emily Chew Chou Lee
Emily Chew Chou Lee
Emily Chew Chou Lee has substantive years of experience in the supply chain solutions sector, and she is involved in the equipment remarketing management. She holds the SIPMM Executive Certificate in Purchasing Management and is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). Emily completed the Diploma in Procurement and Supply Management (DPSM) on September 2021 at SIPMM Institute.

Most Read