PROCUREMENT PROCESS
Every business entity has got a procurement department or a executive who handles all purchases depending upon The size of The
organisation .Big organisations have multilocational purchase unit or in some case purchases are made from central unit .
Purchase deptt plays a very critical and crucial role in smooth functioning of organisation
The Head of Purchase deptt is called Chief Procurement Officer(CPO) .Now days CPO has considerable say in any company policy.
Purchase deptt primary role is to get material at right cost , from right buyer , of right quality and in right time .
Major role of purchase are following
- Raw Material , Ingredients , fuel buying
- Service contract
- Vendor Development
- Vendor Analysis
- Value Analysis
- Annual Contract
- Capital Purchases .
- Maintenance and Repair contracts
- Payments to vendor .
- Inventory control
- Negotiations & long term contracts
- scrap management
- Getting licenses for storages etc.ie liasioning with govt depts
- Imports
- Maintaining and Updating Vendor Master.
- Follow up with vendors for Delivery
Standard procedure for any purchase deptt
- INDENTS(purchase order requistion form ) : First step for any purchase activity is a clear indent fromthe user departments . The
indentshould have authorised signatory .Its should clearly metion the quantitydelivery time and specifications .
- QUOTATION : Purchase executive then floats inquiry as per the details given in the indents.it could be given to one vendor or to
any numbers as stipulated in their organisations standards , the best practiceis to get from one alternate source . In case of
emergency or in vendors reluctance to send quotation in telephonic or verbal inquiry could be floated . Once the inquiries are sent
with clear instruction to vendors for response within stipulated time .Vendors then submit their quotation to the purchase Deptt.
- BID SHEET OR COMPARISON SHEET :Comparison is then made for the best vendors taking into account various factors such as :
a. Price , b. Quality , c. Delivery time , d. Payment terms , e. Warranty , f. After Sales Service
- NEGOTIATIONS : Then Vendors are called for negotiations to further claarification and finalisation
TIPS FOR NEGOTIATIONS
5.PURCHASE ORDER : Purchase orders are then gnerated for the agreedupon terms and conditions Purchase order are then either
faxed or couriered to the suppliers with clear terma and conditions .
PO TERMS AND CONDITIONS
AMENDMENT : There is provision to amend purchase order for terms and conditions due to some unforeseen circumstances which are
beyonds vendors control .
6. FOLLOW UP : After orders are faxed the purchase executive monitors orders for delivery .
7. RECIEPT OF MATERIAL: Vendor then delivers the materials to the store and after inspection reciepts are made for accounts to
release payments for the material.
8.PAYMENTS : The purchase executive then ensures that payments are made to the vendors as per the agreed upon terms and
conditions .
9.IMPORTS : With integration of local economies with global market ,Import has become one of the method for cost reduction.
INCO TERMS : Common terms used in international trade.
SPECIAL PURCHASING SYSTEMS
Forward Buying: Its arrangement with vendor for future buying .Where
orders are confirmed in advance for an year for raw material for a fixed
price this tye of contracts are done by commodities buyer s.They hedge these
in an volatile market to make profits.
Tender Buying :Major Govt agencies and public depts opt for these type of
tendering .Bids are invited and quote are comapred and the lowest bidders is
given contracts.
Blanket Order:Blanket orders are given to reduce admin expenses and issuing
limited orders .The Supplier under the system maintain s adequate inventory
to meet the blanket order.
Zero Stock :Some manufacturing units have arrangement /agreement for zero
stock at manufacturer end .Usually vendor and buyer are close to each other .
Rate Contract: Seller and buyer enters into an rate contract for a period and
deliveries are done as per requirements of the buyer .
RATIOS /INDEX FOR EVALUATION OF PERFORMANCE OF PURCHASING FUNCTION .
Cost Reduction Strategies for Procurement
| Hand book on PROCUREMENT |
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