When it comes to operations management, purchasing process is the most shunned and least-understood areas. Owing to this, purchasing is an open resistance for most of the organisations that end up with arbitrary and futile purchasing processes, which keeps them from the triumph they had longed for. What could be a particular solution? Getting hold of the basics, maybe? In this article we will walk you through the basics, and significance of purchasing in operations management.
Comprehensively, purchasing involves a lot more than what meets the eye. From balancing quality, quantity, and pricing in a way that ensures that your company’s needs are effectively met, to wrapping all this in a pre-determined cavity, without having to stretch your budget a dime.
That is one strenuous task, isn’t it? No doubt it’s the most ignored!
Now that you are acquainted with an overview of what purchasing entails, planning a revamp of your company’s purchasing process won’t present any problem; however, we’ll still delve deeper in order to clear the mist.
Understanding the Purchasing Process
First things first, determine a need for something to be purchased, then decide on the product/service, after which comes the need for setting up a dedicated purchasing team, which will plan for the quantity and specifying the quality requirements. In addition, budgeting, selecting suppliers, logistics, performance evaluation, and then to finally implementing the actual contract, an organized and informed purchasing process needs to be created first.
Stages in the Purchasing Process
- Identifying a demand or requirement.
- Generating a requisition which includes specification for the requirement.
- Placing a request for quotation (RFQ).
- Reviewing quotations received in response to the RFQ.
- Selecting the best offer based on specified criteria such as price, availability, and quality.
- Placing a purchase order, which, once accepted by the vendor, becomes a contractual agreement including crucial terms and conditions.
- Checking the delivery of the products or service to ensure it is complete and meets the specified requirements of the buyer.
- Once this is cleared, the supplier generates an invoice.
- The invoice is cross-checked with the purchase order and the requisite documents/records are filed.
- Payment is made to the supplier.
Enough said we hope we were able to enlighten you with the basics of purchasing process. In our next iteration, we’ll disseminate the benefits; your company can accrue from an organised purchasing process.