Procurement Steps: A Comprehensive Guide to Efficient Purchasing Practices

Posted on Dec 21, 2023 at 06:12 AM

Do you know which of the procurement steps is the most important? Can you identify which suppliers to choose when sourcing and which to stay away from? This article is for you if you answered no to any of the past questions. 

Procurement steps include many things, some of which are sourcing, purchasing, and managing the goods and services that a business uses to operate.

In this article, we'll guide you through the procurement steps to help you streamline your purchasing practices and improve your bottom line.

What are the 5 steps of the procurement process?

As a company leader working in today's market, you know how competitive it is, how hard identifying good vendors is, and what goes into the management and planning of products. 

To succeed in today's market, you must ensure that you have a procurement plan and that your procurement steps are streamlined and efficient. If you're not sure where to start, here are some simple steps that will help you improve your procurement practices:

Step 1: Requirement Identification

Procurement steps start with one key stage, specifying what your company needs. Among others, the first step involves pinpointing which goods and services are required, their specified attributes, the volume of the commodities, and the timeline for delivering them. 

Analysis is critical in the early stages of your procurement life cycle; this is the strategic phase where you evaluate what you need and define all the ways to get it.

Step 2: Acquiring suppliers

After you've decided what you want, your next step is to identify likely suppliers for your supply chains. You should do this by visiting your supplier network, online browsing, and/or peer groups within the sector. 

It's essential in this step to be specific about what you need and which requirement you value the most in your chosen vendor. Do you want someone who sells quality products? Is there a budget you need to stick to? What qualities will motivate you to select one vendor over the other? This way, you can conduct the following steps, like assessment and negotiations, very efficiently.

Step 3: Supplier evaluation 

Third, in the procurement steps, is the evaluation and comparison between potential suppliers. Your supplier selection should count on specifications like cost, quality, lead time, quotes, and past performance. 

Before awarding any suppliers the chance to work with you, you need to create a list of your options and use a scoring system to rate a supplier objectively before determining to work with any of them. 

Step 4: Negotiation and solicitation

The most crucial step in procurement is to negotiate the contract terms, which both ends must clearly define. You can create a proposal comprising the scope of work, quoting price, delivery timeline, payment terms, warranties, or any other guarantee. 

Pro tip: Ensure you have included non-performance penalties to protect your business. However, remember that negotiation is all about cooperation and mutual benefit; contracts should serve both sides, so approach this step with transparency and ensure you're getting your side of the bargain before approving anything or contracting with any bidders.

Step 5: Purchase

Lastly, You need to measure procurement performance by issuing a purchase order, reviewing and approving invoices, and handling returns or disputes in case they occur. Similarly, you should keep tabs on delivery milestones to align with your expected standards, which shall then require quick action in case of a problem.

How do you use procurement steps to your advantage?

While knowing the procurement steps involved in purchasing is enough as a start, you need to understand that mastering the art of procurement can help you develop and grow your company; following the proper steps in the procurement process can benefit your business in so many ways, here are a few: 

• Procurement steps help companies save time, money, and materials.

• Clear stipulations for requirements, specifying the suppliers and making comparisons ensure the best supplier selection.

• Faster procurement procedures save time and money by cutting waste.

• More efficient procedures further improve credit terms, possibly reducing prices to vendors.

• The optimised Public Procurement Cycle itself is used as a competitive weapon.

• Building Effective Supplier Relationships Can Boost Competitiveness.

• A world-class procurement function can bring down buying prices.

• A streamlined procurement procedure increases profits and more extraordinary overall organisational achievement.

Procurement short courses: are they right for you?

Two steps ahead make all the difference in today's rapidly changing business world. This is especially true for procurement personnel. New technologies, market developments, and procurement strategies mean practitioners' skills must constantly be upgraded. Procurement short courses are among the more popular choices for professionals seeking to enhance their skills. The focused, intensive programs provide rich insights and valuable tools to navigate the changing face of procurement.

In conclusion 

Whether your goal is to improve your product or service, grow your business or simply get more quality material for your supply chain, following these steps is primary when optimising your procurement process.