Here's a simplified breakdown of procurement:
1. Need Identification:
- Determining what goods, services, or works are needed.
- Understanding the specifications and requirements.
2. Supplier Selection:
- Researching potential suppliers.
- Evaluating their capabilities, reputation, and pricing.
- Shortlisting the best options.
3. Contract Negotiation:
- Discussing and agreeing on the terms of the contract.
- Setting delivery dates, payment terms, and other details.
4. Order Placement and Contract Management:
- Placing the order with the chosen supplier.
- Monitoring the contract throughout the process to ensure compliance.
5. Goods/Services Receipt and Payment:
- Receiving the goods or services.
- Verifying the quality and quantity.
- Making payment as per the agreed terms.
Why is Procurement Important?
* Cost Reduction: Finding the best deals and managing expenses efficiently.
* Quality Improvement: Ensuring the goods or services meet the required standards.
* Supplier Management: Building strong relationships with reliable suppliers.
* Risk Mitigation: Identifying and managing potential risks associated with procurement.
* Efficiency and Productivity: Streamlining the procurement process for better time management.
Examples of Procurement Activities:
* Purchasing office supplies
* Hiring a construction company for a new building
* Sourcing raw materials for manufacturing
* Hiring consultants for a specific project
In a nutshell, procurement is the backbone of any organization that relies on external resources. It ensures that the right goods and services are obtained at the right time and at the right price.