Procurement is the process organizations follow to buy and pay for goods and services. This begins with a request for good for services by the users to the issuance of a purchase order, receipt of goods or services and finally payments. According to the Chartered Institute of Purchasing and supplies, the procurement cycle comprises seven phases;
- Identification of a requirement. This is the stage where the user department raises a requisition as well as specification of the goods and the services needed to be procured and this requisition will describe the nature of the goods and the services required and the specified quantities and this requisition should be approved.
- Obtaining Quotes. Upon the receipt of the approved requisitions from departments, the procurement teams obtains quotes from the suppliers by issuing Requests for Quotations.
- Assessing Offers. Once the procurement team has received the quotes, the team may want to tender the work to a selected number of suppliers. Tenders are often carried out where the cost is high, or a large volume of goods are required or where the work is specialized. Invitation to tender is sent to suppliers for them to quote their best price and the details of how they will satisfy the requirements.
- Negotiation and Finalization of the Agreement. Once a supplier has been selected and a price agreed, a contract is put in place to add some security to the supply.
- Placing an Order. Once there is an agreement or a contract in place, orders can now be placed. The orders are often approved by respective managers and the procurement team prior to being sent to the supplier.
- Receiving the Goods. When the goods are delivered by the supplier, they are accompanied by a delivery note. This is a summary of all the items in the package and acts such as a checklist for the buyer to ensure that no items are missing.
- Paying the Supplier. The final step in the cycle is the payment process. At this stage, the accounts section with match the purchase order, the delivery note or receipt and the invoice. If all the documents correspond to the invoices sent by the supplier, the payments are made.
