How Procurement Works in Corporate Companies: Simplified

Procurement is a vital function in any corporate company, responsible for acquiring the goods, services, and works necessary to achieve business objectives. In this article, we’ll break down the procurement process into simple, easy-to-understand steps.

Step 1: Need Identification

The procurement process begins when a business need is identified. This could be a requirement for new equipment, software, or services. The requesting department or employee submits a request to the procurement team, outlining the specific needs and requirements.

Step 2: Specification Development

The procurement team works with the requesting department to develop a detailed specification of the required goods or services. This specification outlines the technical requirements, quality standards, and any other relevant details.

Step 3: Sourcing Options

The procurement team explores sourcing options to identify potential suppliers. This may involve conducting market research, reviewing supplier databases, or reaching out to industry contacts.

Step 4: Tendering or Quotation

Depending on the complexity and value of the procurement, the company may choose to issue a tender or request for quotation (RFQ). Suppliers are invited to submit bids or quotes, which are then evaluated by the procurement team.

Step 5: Evaluation and Selection

The procurement team evaluates the bids or quotes received, considering factors such as price, quality, delivery time, and supplier reputation. The team selects the best supplier and negotiates the terms and conditions of the contract.

Step 6: Contract Award and Management

Once the contract is awarded, the procurement team manages the contract, ensuring that the supplier meets the agreed-upon terms and conditions. This includes monitoring delivery schedules, quality, and pricing.

Step 7: Invoice Approval and Payment

Finally, the procurement team reviews and approves invoices from the supplier, ensuring that the goods or services have been delivered as agreed. The company then makes payment to the supplier.

The procurement process is a critical function in any corporate company, ensuring that goods and services are acquired efficiently, effectively, and at the best possible value. By following these simple steps, companies can streamline their procurement processes, reduce costs, and improve overall business performance.