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Home / Procurement Process Explained

Procurement Process Explained

The first stage of the procurement process is understanding the need. Procurement professionals need to be interpersonal and wear several different hats. Procurement is responsible for understanding the business requirements are to aid internal stakeholders in sourcing goods or services to meet their needs.

Procurement professionals are sometimes viewed as blockers or challengers who delay the sourcing process, it’s important to work within the culture of your organisation but if procurement is passive ie. offers no strategic direction, there is an opportunity to show that good procurement adds value.

Procurement has an increasingly important role to play because:

  • Savings add to the bottom line
  • Achieving VFM means an organisation can get a fair price for the goods and services at the right quality.
  • Good procurement practice can assist an organisations cash flow
  • Procurement professionals offer commercial and strategic advice. This should increase competitive advantage.

Is there a market for the need, or does the company want something different that requires innovation? As part of the procurement process, the procurement manager should provide advice on the supplier landscape.

Some organisations use a business case as a governance mechanism to commit funds. It is best practice to use business cases when a contract value hits a certain threshold. A business case should prove that the need is valid and not a nice to have. It should outline the requirements, cost, and risk.

For high value or complex contracts, the procurement manager should include a step to develop a procurement strategy. This will help all parties have a single document for reference and sign off. The procurement exercise should be aligned with the strategic goals of the organisation.

Private sector companies can select a number of suppliers or draw up a vendor list to issue an RFI or ITT. Public sector buyers must advertise on the open market, typically use Contracts Finder.

Tenders issued and suppliers are given a few weeks to respond. The bidder typically includes information of ability to supply within timescales, how performance will be implemented, proposed performance measures, include resources, ability to provide within the budget or submission of their tender price based on the specification.

Bids are to be submitted by the deadline stated and distributed to the evaluation panel for scoring and evaluation.

Internal governance rules are carried out before a contract is awarded. Terms and conditions are negotiated by Procurement sometimes with the assistance of the legal department if resources are available.

Warehouse and logistics I will skip this step.

Contract management involves the specific contract and whether if performance is as expected. Managing suppliers might be in the form of getting relevant data in the form of MI and KPI reports. Procurement can also work jointly with internal stakeholders/budget holders to hold monthly service reviews.

Procurement process post tender

Supplier relationship management involves the management of a supplier who might have several different contracts with the business if tendered separately or by different business units.

Asset management is the management of physical goods such as IT hardware or it can be digital goods such as a digital asset management repository.

This is a very basic outline of the procurement process. For more information on different steps of the procurement process read the blog or use the search function.

 

 

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