The procurement process is a vital part of doing business for commercial organizations. Therefore, it is essential that the entire process runs smoothly, since this will directly impact the organization’s overall performance. But what are the exact steps involving the procurement process? And how can you maximize efficiency at each stage of the process? Read all this information in the following article to gain more insight.
What is the procurement process?
Procurement is an essential part of any business function – it involves all the activities needed to obtain goods and services at the lowest possible prices and with the higest potential value. The functioning of the procurement process varies greatly between different companies. When the procurement process flows smoothly and efficiently, it can improve a company’s profitability signiticantly.
The procurement process consists of a wide range of different activities, including:
- Identifying the goods and services that are necessary for the company.
- Considering and selecting a list of suppliers.
- Negotiating the prices and contract terms with suppliers.
- Completing the purchase order (consisting of the total costs, the quantity and a description of the goods and services involved).
- Reveicing the products/services and inspect whether there are any damages.
- Keeping records of the invoices and payment records.
To be able to increase efficiency, a couple of questions are important to answer at each stage. For instance, what inefficiencies do we run into at each stage? And which stages have priority when attemtping to improve efficiency? Once these kinds of questions are answered, it will quickly become clear at which phases improvements are necessary.
Outsourcing the procurement process
Certain stages of the procurement process can also be outsourced – this means that some activities are transferred to a third party that will be responsible for completing these specific activities. This brings along several advantages. For instance, hiring a third party will save lots of time as you no longer need to worry about the step in the procurement process that you have decided to outsource.
Also, outsourcing the procurement process gives you insights in the specialist set of skills that those professionals possess and you can benefit greatly from them. Chances are that professionals have greater knowledge and experience about the procurement process. This set of skills can most certainly be used to your advantage.
Organizing the procurement process
Have you become interested yourself in outsourcing the procurement process? Luckily, there are many different options. For instance, you can make use of source to pay services or procure to pay services. These services will be provided by a third party that helps you organize the entire procurement process more efficiently. The source to pay service is very comprehensive as it examines the complete procurement process to conclude which stages can be improved. This gives a full insight of the organization’s performance and profitability throughout the procurement process. However, the procure to pay service is a bit more limited – it solely looks at the purchased goods or services and in what ways that stage can be improved to maximize efficiency in the entire process.