What is Procurement Methods and Process-ITFC

1
(No Transcript)
2
What is Procurement Procurement Methods
Procurement Process ------------------------------
--------------------------------------------------
--------- What is Procurement?
Procurement in any company is a strategic process
of acquisition or purchasing of goods, works,
and services from external sources or
organizations by inviting them through the
different procurement methods like tenders, rate
contracts, and purchase orders mainly. The need
for Procurement In any business sector, every
organization always trying to improve the
profitability using different processes and
strategies. In this procurement is one of the
processes that every business follows.
Procurement is viewed as a strategic function
working to improve the organization's
profitability. Procurement can save money, time,
and be the way to success for any business, most
of the organizations are agree with this. Its
savings directly impact bottom-line profits and
are one of the most beneficial models for driving
a companys profitability and increasing
shareholder value.
3

• The goal of public procurement is to satisfy the
  public interest or to give the community value
  for the money spent
• A good procurement process is one that
• Obtains goods works or services
• In the correct quantity
• Of the appropriate quality
• At the required time
• From the best supplier
• With the optimum terms
• Under appropriate contractual obligations
• Good procurement should
• Meet community needs
• Secure value for money for the community
• Be fair to bidders
• Different Methods of Procurement
• Procurement methods are the processes of inviting
  suppliers or vendors to fulfill the
  organizations needs in terms of auxiliary
  products, services, and goods at the best
  possible cost.

Fig.- Different Types of Procurement Methods
4

• This procurement invitation process gets done by
  different methods
• Auction
• Acquisition
• Rate Contract
• Purchase Order
• Agreement
• Tenders
• Auction
• An auction is a sales event wherein potential
  buyers or vendors place competitive bids on
  goods or services either in an open or closed
  format. Auctions are popular because buyers and
  sellers believe they will get a good deal of
  buying or selling assets.
• Acquisition
• The acquisition is the method of acquiring a
  company and reporting the purchase on the
  balance sheet of the company that acquires it.
  The resources of the targeted organization are
  added to the balance sheet.
• Rate Contracts
• Rate Contracts is the agreement between the
  purchaser organization and supplier firm to
  provide assets at a specified price for the
  mentioned period as in agreement.
• Rate contracts are mainly Fixed Price(FP)
  contracts, Time and Material(TM) contracts, and
  Cost Reimbursable(CR) contracts.

5
and objectives, the cost is not always the
determining factor. Major projects within the
Indigenous community are often viewed as an
opportunity to provide training that will lead
to future employment opportunities for its
citizens. Suppliers willing to recognize the
bigger picture often find additional
opportunities their companies can benefit
from. Indigenous communities will often utilize
the Invitation to Attend request for bid or
documentation which should be interpreted as an
opportunity to build a relationship with the
community. What is Procurement Cycle or
Procurement Process The procurement cycle is a
series of steps to acquire goods and services
after identifying needs and specify them. This
cycle follows by every industry and every
organization.

• Fig.- Procurement Process or Cycle Image
• From the first step identify the needs for
  payment and record maintenance this cycle has
  different stages. These areas follow
• Identify Needs
• Specification of Need
• Selecting Procurement Method
• Shortlist Select Suppliers
• Award of Contract
• Receive Goods/Services
• Evaluate Performance

6

• Supplier Relationship Management
• Invoice Approvals and Payment
• Record Maintenance
• Identify Needs
• The first step of the procurement cycle is to
  identify what services and goods should exactly
  need and why. The purchasing department,
  technical expertise, and some other company
  department discuss the needs and summarizes the
  need, and prepare a document.
• Specification of Need
• All team members and experts specify the needs of
  services and goods. Specify the quantity,
  quality, product, and service they want to
  acquire. After that, a legal document prepares
  with all specifications.
• Selecting Procurement Method
• Select one of the procurement methods suitable
  for the purchaser, buyer, and business workflow.
  Most of the time public or government
  organizations choose the tendering methods
  because of some budget constraints.
• On the other end, private companies and
  organizations choose methods like rate
  contracts, purchase orders, or maybe some time
  acquisition.
• Shortlist Select Suppliers
• After the process of tendering and bids are done,
  shortlisting and selecting the most likely
  vendor is becoming the most important stage. The
  solicitation contains all of the criteria that a
  prospective offeror must accommodate and honor to
  be considered for award.
• Award of Contract

7
Supplier Relationship Management(SRM) This is
the systematic approach an organization takes in
assessing supplier contribution. This clears the
scenario for the supplier on how its services
impact the business of the buyer. This also
introduces the scope of improvement in the supply
chain process between needed and provider. This
most important part of the Supply
Chain Development in Supply Chain Management
(SCM). This step also important because it is
carried out to determine if business requirements
have changed. Invoice Approval Payment This
stage of the procurement process will involve the
companys finance department. The finance
department receives bills and invoices from the
supplier. After this finance team matching the
invoice against an approved Purchase Order(PO).
If everything is per the contract terms and
purchase order finance department sends payment
to vendors. Record Maintenance This final step
of the procurement cycle is most important to
justify all procurement needs and how had this
impacted companys profit. The audit department
keeps all purchase requisitions through the
invoice. Summary The procurement process is the
long-term strategic process for any organization.
The objective of this article is to provide the
information and knowledge of an effective
procurement process that helps organizations to
create a well-structured cycle. After reading
the complete post your last question may be How
and where to find procurement opportunities?
then some organizations come into the picture
that offers procurement services for both
purchasers and sellers to make easy business
development.