Procurement Process Diagram

What are the five steps in the Procurement Process???

1. Define the business need 2. Develop the Procurement Strategy 3. Supplier Selection and Evaluation 4. Negotiation and award. 5. Induction and Integration

The terms "Purchasing" and "Procurement" are often used, incorrectly, interchangeably. So what is the difference between purchasing and procurement? What does procurement entail and what exactly does purchasing mean.---------------Procurement Definition

Procurement Definition To define procurement broadly, "Procurement" is the overarching function that describes the activities and processes to acquire goods and services. Importantly, and distinct from "purchasing", procurement involves the activities involved in establishing fundamental requirements, sourcing activities such as market research and vendor evaluation and negotiation of contracts. It can also include the purchasing activities required to order and receive goods

The terms "Purchasing" and "Procurement" are often used, incorrectly, interchangeably. So what is the difference between purchasing and procurement? What does procurement entail and what exactly does purchasing mean.------------------------Purchasing Definition

Purchasing Definition The term "Purchasing" refers to the process of ordering and receiving goods and services. It is a subset of the wider procurement process. Generally, purchasing refers to the process involved in ordering goods such as request, approval, creation of a purchase order record (a Purchase Order or P.O.) and the receipting of goods.

The Procurement Process 1. Define the business need

The Procurement Process 1. Define the business need You need to understand what the fundamental business requirement is. At this point, it is important to understand the difference between a requirement and a solution. For example, the business requirement is to source some software to help to get information published on the company intrantet. An item of software to publish information on the company intranet is a solution - not a requirement. The requirement is to be able to publish information on the intranet. It may be that an outsourced solution is a better option.

The Procurement Process 2. Develop the Procurement Strategy

The Procurement Process 2. Develop the Procurement Strategy Depending on the scale of your project, there could be a very wide range of potential solutions and approaches to your business need and a number of ways of researching the market and selecting a supplier.

The Procurement Process 3. Supplier Selection and Evaluation

The Procurement Process 3. Supplier Selection and Evaluation After researching the market and establishing your procurement approach, you need to evaluate the solutions available. This may involve a formal tender process or an on-line auction. You criteria for comparing different solutions and suppliers are critical. Weight the key criteria heavily and don't attach too much importance to aspects that will have little impact on the solution.

The Procurement Process 4. Negotiation and award.

The Procurement Process 4. Negotiation and award. Even when you have selected a supplier it is important that detailed negotiations are undertaken. This is not just about price. Think in terms of Total Cost of Ownership. A cheap product is not so cheap if the carriage costs are huge or if the maintenance contract is onerous. Consider carefully the process by which the goods or services will be ordered and approved; how they will be delivered and returned if necessary; how the invoice process will work and on what terms payment will be made. Considering the whole Purchase to Pay process (P2P) at the outset can reduce costs and risk significantly

The Procurement Process 5. Induction and Integration

The Procurement Process 5. Induction and Integration No goods or services should be ordered of delivered until the contract is signed, but this is not the end. It is vital that the supplier is properly launched integrated. The P2P process needs to be in place and need to be understood on both the buy-side and the supplier side. Any service levels that have been agreed need to be measured and KPIs put in place. Regular reviews should be established.

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