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What is Procurement?

BY: Raja Vikram | Category: Others | Submitted: 2010-04-26 01:01:49
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Article Summary: "This is to give an idea of purchase process of an organization..."


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Every organization needs some material for use, whether it is of any nature. Each company has to buy products for use. Companies need to check the goods and services to perform the routine work. Hence to acquire the products and services there should be a process, which makes it smoother. To make the whole purchase process as smoother we look at different association. If we need to buy a product we check the availability of the product in the market. We check in which shops do the product is available? In the same way the companies work to buy the product and services from different suppliers. Hence "acquisition of goods or services at a best possible cost is called as Procurement".

In this the company works on a process to find out the suppliers and to get benefit out from them. The process may be

• Collecting Information: At the present scenario there are lot of people or suppliers who offer the same kind of products and services. Hence it is better to collect Information before buying the requirement.

• Making a Contact: After finding out the information who are the suppliers that offering your requirement, it is better to make a contact them by telling them your requirement.

• Work on their Background: It is better to go through their background, or their working capabilities. So that you can find the proportion of their quality in the product or service.

• Negotiation: After performing the above activities, and concluding the meeting with them. It is better to compare the quotes and find the lowest quote, depending upon that try to do negotiation to find the product at a best possible cost.

• Fulfillment: To complete the process making a Purchase Order and giving it to the supplier. Where the terms and conditions, price, time and date, shipping terms, delivery etc are mentioned.

• Continue and Renewal: After the completion the company come across with the working nature of product, and they check with the service they are offering which in lay man terms said as after sales service. Depending upon that the company plans for the renewal of the product or service during the expiry period.

For Ex: if there are X Y Z three suppliers offering your product. Then after getting this knowledge you should get in touch with them, after that working on their backgrounds to find out the quality of service. Then comparing the quotes of X Y Z and making a meeting with the lowest offered quote supplier. If not this way then need to check out with two things one is lowest cost and other is Quality of service both are important. Hence finishing negotiation you can prepare the P.O to finish the process.

Before buying a product there are some factors which need to be checked frequently. Those may be Price, Quality, Delivery, Service Conditions, Credit terms if any, Delivery methods and so on. After checking all this need to discuss with the suppliers and making a mutual understanding is better. Then mentioning all these in the terms & Conditions of the P.O is better for both the parties.

Hence to get a requirement for a lower cost and make the process smoother the companies work on these Procurement process. Now a day's companies do work on ERP packages to make it smoother. This way the companies buy their requirements in a professional and perfect manner.

About Author / Additional Info:
An MBA from GITAM University,India.

Reference: Wikipedia

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