Steps for Effective Procurement Process

by Walter Deagle A Economic Inclusion Netwrok Canada

An effective procurement process is essential for the economic success of any business. It helps companies to acquire goods and services at the most competent price. It minimizes the time of delivery by outsourcing to the best business partner.

Some organizations provide procurement services that help you to make a strategy for the successful procurement process.

What is the Procurement Process?

The procurement process is a series of steps to successfully procure goods and services from the supplier or service provider companies to achieve the end product.

To understand the procurement process, we have to look at the flow of procuring things and services step by step. The procurement process can be different depending on the size of the organization and the type of procurement.

Image Source: Kissflow

7 Steps of Procurement Process

To understand the process of procurement we divided this process into simple steps. Here are the steps one by one.

1. Identify the Need of Goods and Services Require

The procurement process starts with identifying the need for goods and services required to achieve the end products. At this stage, organizations sketch out the plan for acquiring goods or services, calculate the quantity they need, cost, and timeline of completion of procurement.

2. Evaluate the List of Suppliers

After the process of identification of goods or services gets done. Now it’s time to choose the right vendor for the supply. This step is vital if you choose the wrong supplier then it directly affects your whole business. This process generally starts with a web search or through more structured measures like RFPs, RFQs, and RFIs.

To choose the best vendor evaluation of the pricing, quality, industrial reputation, quality of services, warranty, and guarantee provisions. The thumb rule is to get at least three quotations and select the best one.

3. Submit A Purchase Request

After finalizing the vendor it’s time to raise a Purchase Requisition (PR) to the company’s purchase department. The procurement team or a financial controller of the company reviews the submitted purchase request.

A Purchase Requisition includes the following details:

  • Description of Goods or Services
  • Pricing
  • Quantity Required
  • Supplier Information
  • Approval Workflow

4. Generation of Purchase Order

After approval of the purchase request, the finance department makes a Purchase Order (PO) and sends it to the supplier. PO is a formal contract to purchase objects.

Purchase Order (PO) Includes:

  • Product(s) or service(s) being purchased
  • Quantity purchased
  • Specific brand names, SKUs, or model numbers
  • Cost per unit
  • Delivery date
  • Delivery location
  • Billing address
  • Payment terms conditions

5. Receive Invoice

Once the supplier gets the PO next you will receive an invoice from the supplier. The invoice has details such as the cost of goods/services to be procured, payment schedule, mode of payment, and terms conditions.

This invoice and purchase order are compared by the purchasing department to ensure quantity and quality.

6. Payment Process

Once you received the good(s) or services(s) from the supplier. It’s time to pay. The process of payment depends on the agreed terms and conditions between the company and its supplier. Payment can be released pre or post-delivery.

7. Record Keeping

A record of purchase orders and invoices is necessary for auditing. When the internal or external audits are carried out, then it’s easy to audit.


Now you know all the steps of the procurement process. Procurement is the long-term strategic function of any organization. This function helps in the cost-cutting, and every big organization has to procure some goods and services from the vendor to run a profitable business.

The objective of this article is to help you to make an effective procurement process strategy. This article educates you on the complete steps and planning of procurement.

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About Walter Deagle Freshman   A Economic Inclusion Netwrok Canada

8 connections, 0 recommendations, 49 honor points.
Joined APSense since, July 23rd, 2020, From Wolfville, Canada.

Created on Aug 10th 2021 03:47. Viewed 175 times.


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