The life cycle of procurement is based on your company identifying the need for goods or services from an external source and acquiring the need. Once those needs are identified and defined, the process of procurement can begin. For a more detailed definition of procurement please read What does Procurement Mean.
How does procurement work?
Whether acquiring raw material goods (wood, metal, plastic) or acquiring the results of those directly procured goods (a desk and the labor involved in delivering and assembling the desk), a company starts the procurement process in two basic ways.
Assuming your company has researched and defined its needs for goods and services for your project or short term strategy:
- vendors offer bids
- your company requests a tender from suppliers
After your shortlist of vendors has been made, proposals for product and product delivery can be requested from suppliers. The vendor might offer quotes for goods or labor, proposals for services, samples and demos of previous work, and maybe a trial period to use the product (especially for project management software).
During this time a quote of what maintenance, warranty, and training will be offered is presented.
Around the time your company has settled on a vendor, the process of negotiation will unfold naturally.
- Where do the needs of your business and abilities of the vendor meet and how can they more successfully match?
- Is the true price (reconciling cost, time, quality of product) worth doing business with the vendor?
- Can this vendor customize their product to your company’s requirements?
- What sort of schedule are they able to offer in terms of implementing their product?
Unnecessarily lengthy software installation and training for example can slow business for months. These are things to consider while forming a contract with a vendor.
After the negotiation and finalization of a contract, it is up to the company to assess and audit the performance of the supplier and their product. This often requires close communication and collaboration with the vendor by a procurement manager. Read more about procurement management plans.
Vendor preparation, shipping and delivery, installation, and training can all take time and energy from your company. The logistics of implementing procurement and online purchase order software if not done with the ease of Purchase Control, could take valuable resources away from your company and its capacity to do business smoothly.
This is an additional though sometimes important step in the procurement process. An invitation to open tenders or call for bids early in the process can increase competitive prices and make the negotiation step much more fruitful for your business.