Purchasing, the formal process of buying goods and services from an external supplier, is an aspect of a procurement strategy based on a need within the company’s operations.
Supply chain management and purchasing.
The purchasing process is an aspect of the procurement strategy in a company. The importance of effectively managing the supply chain and your company through efficiently controlled and policy compliant purchasing is truly paramount to a successful procurement solution.
Bidding and quotes
Suppliers are selected by the project management for the good or service after a request for a quote or bid has been made. The bidding process is a way of ensuring the most competitive offer is procured. This process is informed by an analysis of the overall cost of working with a supplier and the benefit of using their product. The supplier with the best price for the best service is selected.
Once the need of the project is identified and a supplier selected, a purchase order for fulfilling that need can be generated. This is the itemised document that opens a purchase agreement for goods and services between your company and the supplier. Procurement software and purchase order software allow this process to be automated and paperless.
For more detailed information on POs: What is a Purchase Order?
It is often the practice of a procurement department to impose the requirement of a requisition. Before a PO can be opened with a supplier a request for procuring goods and services must be submitted to the project management. This request, or requisition, is a function of internal controls placed on the purchasing department of a company.
For more information on the process and importance of approval process: Purchase Authorisation
Setting limits in the purchasing process.
As mentioned above, the effective control of the purchasing process is of the utmost importance to the health and success of any project’s procurement strategy. A large part of this is implementing and enforcing department budgets and individual purchasing limits. These parameters define the length and breadth of the procurement field and the departments and individuals within the company are the gardeners responsible for making that field bear fruit.
Use of purchase order software can streamline and automate your purchase to pay process. Practical application of purchasing software can also mean setting up budgets and limits within a purchasing department. Purchase Control online procurement software also gives the project management the capacity for automatically enforcing the controls and limits all in real-time, from any computer with an Internet connection and web browser.
Measuring performance of your purchasing department.
In the purchasing process, it is not enough simply to control spending. Defining sourcing policy based on an in-depth analysis of performance is integral to an effective procurement strategy.
If the purchase process is compliant to limits and certain rules but the purchase department is sourcing from ineffective suppliers or suppliers who are not able to grow and evolve with your company, the overall effectuality of the purchasing process is diminished.
This is where comprehensive accounting and purchase order software are invaluable. The data that can be mined and put to use from a coherent picture of the whole purchasing relationship to a certain supplier can be critical in improving the performance of your company’s entire procurement management solution.