2Procurement Contracting Process Analysis PaperChristmas Tree Farm owner, Will Fence, has hired Team C to set up the procurement planand build his tree storage expansion. Will has purchased 40 acres to expand his storage yard by 40,000 square feet and allotted $55,000.00 for the project. The team will focus on the contract resource procurement process to assist the owner with contract negotiations between himself, potential partners, and vendors. A thorough procurement plan, risk analysis, and advice on contract types are provided by Team C throughout the project. To achieve this, detailed information is required to ensure his vision is fulfilled in the most cost effective way possible byhis October deadline, when the newly chopped down trees require storage. Resource Procurement ProcessWill has purchased the property and given the team a budget, but to begin the contract resource procurement process, the team must obtain as much detail as possible from the client about the project. This ensures the first step, which is creating the purchase plan, will not miss any vital requirements to complete within budget and on time. Information the team must ascertain as examples are, does the land purchased need to be cleared and leveled? Is there sufficient shade to protect the trees or does the client expect a structure to be built to achieve this? In addition, where is the property located and will this require special vehicles or equipment and permits to clear and erect the structure? A plan for procurement can be established once the clearest picture possible of the finished project is established. There are four key elements included in the plan: documenting the purchase process, documenting the types of items for purchase, performing the build versus buy analysis and decisions, and identifying potential sellers (Wilson, R. 2015). Purchasing is the next step in the contract resource procurement process and has four components as well. The first is creating the request for proposal (RFP), second, obtaining seller
For the uninitiated business owner – or, for that matter, the novice – the procurement process can appear to be a simple, basic procedure.
Locate needed goods. Pay. Receive purchased goods. Document transaction.
But like all important (integral!) business functions, procurement is a layered, fluid business process with multiple moving parts there are numerous stages in the procurement process.
Procurement is so dynamic, in fact, that it requires constant analysis and monitoring by someone (or a team) within an organization. There is always more to know/more data to analyze/more forecasts to produce – all of which is a responsibility of procurement.
So…what are the stages in the procurement process? What are those constantly evolving pieces in procurement?
Stages in the Procurement Process
As one learns/reads more about the procurement realm, it becomes glaringly obvious that each of the writers, theorists and consulting firms involved in procurement has a slightly different take on the stages in the procurement process.
With that in mind, our friends at the Chartered Institute of Purchasing and Supply and businessdictionary.com have cobbled together a solid list of the critical stages in the procurement process.
Here it is:
Step 1: Need Recognition – This is a seemingly obvious step, but one that needs to be mentioned. A business owner (or procurement department) must recognize a product is needed in order to purchase it. That product can be either a brand new item, or one that is being re-ordered.
Step 2: Specific Need – Does your industry have specific requirements for various products. If that is the case in your industry, be sure you are up-to-date on those requirements and order accordingly.
Step 3: Source/Examine Supplier Options – Every business needs to determine where to get their goods. Some companies have an approved vendor’s list (this is a recommended practice) while others are still trying to determine who the best suppliers are. Once a supplier is chosen, companies should stick with that relationship and try to establish preferred pricing.
Step 4: Price and Terms – Once a supplier is chosen, companies should stick with that relationship and try to establish preferred pricing and specific terms (i.e. delivery).
Step 5: Purchase Order – The purchase order is used the formal contract used to buy the product. The purchase order outlines the price, specifications and terms and conditions of the product or service and any other additional obligations.
Step 6: Delivery – The transfer of the purchase order via email, mail or fax (email is highly recommended).
Step 7: Expediting – This stage addresses the timeliness of the service or materials delivered. Delays, for many businesses, are important. The purchase order will have expected delivery date information.
Step 8: Receipt and inspection – Once delivered, the receiving company inspect and, subsequently, accepts or rejects the product. Rejection is almost always due to a damaged product.
Step 9: Invoice Approval and Payment – At this stage, three documents must match when the seller wants payment – the invoice, the receiving document (attached to the product) and the original purchase order. This is known as three-way matching. If there is a discrepancy, it must be resolved before payment is made.
Step 10: Record Keeping – The receiving (buying) company must keep good records. This means saving all relevant documents for every completed purchase.
How can e-procurement help?
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An e-procurement solution can be a significant source of help in various stages of the procurement process. For instance, an e-procurement solution will electronically generate purchase orders, with all of the requisite information.
Also, an e-procurement solution is a critical tool when it comes to delivery and record keeping. With an e-procurement solution, all purchase orders will be sent electronically in the system (an email notifying all parties will be sent as well), ensuring delivery is completed immediately.
Finally, an e-procurement solution will catalogue every transaction in the system, ensuring your records are kept up-to-date. Those records are of critical importance for financial forecasting, or in the vent of an audit.
The benefits of an e-procurement system like Procurify extend to each stage of the procurement process. Stream line your purchasing and procurement processes, reduce employee headaches, eliminate annoying paperwork.
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