1) Purchase Requisition (PR): It is the list of goods / services which to be identified &
prepared by the user department based on business needs or against project
requirements and it’s their responsibility to get it approved from the
business head, finance, etc. (as per organization’s approval hierarchy) to
procure the goods / services. Approved PR to be sent to procurement
department to get the goods / services. 

Many says, identification of goods / services, preparation of PRs and
approval of PRs are part of the procurement process but as per my
understanding PR is an input to start procurement process. It means,
procurement cycle starts post receiving of approved PR from user
departments.

a) Needs Analysis: Assigned procurement personnel needs to analyze the goods /
services against purchase requisition and check the availability of goods
with store. If it’s available, issue material requisition (MR) against PR
to storekeeper to release goods to the user and close the PR (partial or
full) without buying it. Rest of PRs needs to segregate into two
categories, which are:

i) Clear PR (all the required details are mentioned): Act to procure goods / services against it.

ii) Incomplete PR (all the required details are not mentioned): Communicate to the user and ask the details which are missing in
PRs. It’s not an easy task to get the details from them but you need
follow-up with them to get it. Once you get all the required data, shift
the PR into Clear PR category and act to procure goods / services against
it. If they really failed to provide the required data, you have all
rights to reject the PR and communicate to them with marking to their
business head. 

b) Review Mechanism: All the Pending PRs need to be reviewed on daily basis which help
to keep self / team update against requirements. List the priority and
procure according to the priority list to meet the deadline 

c) Identify the Supplier: List the supplier from database or source new supplier against
requirement. 

2) Request for Quotation / Proposal (RFQ / RFP): Send the enquiry to the listed supplier and follow-up for the quotation /
proposal. Evaluate the quote in terms of technical, commercial, payment
terms, delivery, etc. If you find error, talk to them and get it corrected
before getting into comparison with other suppler. Please note, all the
suppliers must be proposed price for same spec., brand, quality,
etc. 

3) Price Comparison (PC): Price comparison to be created once you receive quotation from all
the vendor which you sent enquiry and submit it to the head of department
to start negotiation process. 

4) Negotiation: This is most important process in procurement functions. You need
to understand in detail about goods / services and research the market
about it before start negotiation with the supplier. Some say, it’s an
art. Some say, it’s a science. But I can say its combination of
Arts-Commerce-Science. How? Art will apply when you convince your supplier
to agree with your points, commerce takes care commercial part of
negotiation and science do rest all like technical terms, specification,
SLA, etc. Strong negotiation generates handsome savings which impact to
company’s profit. 

Before negotiation, you need to choose mode of negotiation, which
are: 

a) Offline: You need call all the vendor one by one and negotiate over phone or call
them to your office to negotiate. I suggest starting with L1 (whose cost
is low) supplier and followed by L2, L3 …. Once you finished negotiation
with all the suppliers, ask them to submit revised quote / proposal. Make
a price comparison version 2, once you received all the revised quote /
proposal from the supplier and submit to the head of the department to
approve / review.

b) Online: Its run through web based online tools. You need to be registered all the supplier in your web-based
negotiation tools. Prepare the auction with selected suppliers and publish
it in web to enable them to bid in stipulate timeline. Negotiation will
automatically stop once time is up and post auction you need to download
the report from your tool and submit to the head of the department to
approve / review. 

5) Award: Once commercial & supplier finalized, issue Purchase Order (PO)
or Work Order (WO) to the supplier / contractor with agreed price, terms
& conditions and have the PO / WO signed by the head of the department
or signing authority and send it to the supplier / contractor for supply
of goods or services. 

6) Goods / Service Receipt, Payment & Records: Supplier / contractor supply goods / services against PO / WO to
store or user department. Storekeeper or user department receipt the goods
/ services and they need to certify the quantity and quality of the
product or services. They acknowledge the goods or services and signed the
vendor Delivery Challan (DC), which is the acceptance of goods or service
receipt. Suppliers submit the commercial invoice along with this DC which
support to proof of delivery to the user or store. User to certify the
invoice from their department head (HOD) and submit it to the procurement
department to process.

Procurement team check the invoice with reference to PO / WO to process
it to account and payment to the vendor. Invoice checklist can be – i)
original copy, ii) price, iii) quantity, iv) statutory compliance, v)
billing and delivery address, etc. Procurement team needs to follow-up
with finance department for timely payment to the vendor. 

Maintain proper database of supplier / contractor and also maintain
proper records of quotations, PO, WO, Invoices and other important
documents.

Summary

You need to be aware of the procurement processes within your company. As
discussed above, these can be briefly summarized as follows:

• Get the clear PR from the user department

• Request for quotation from your supplier

• Prepare comparison statement and negotiate with supplier 

• Issue Purchase Order to the selected supplier with agreed price and
  terms & conditions

• Follow-up for goods / services

• Once received the goods / services, submit the commercial invoice
  to the Finance Depart for payment.

• Cross-function co-ordination is very important to improve process effeciencies.

 

Hope, this will help you to understand simple procurement process cycle.
If your procurement process is differed from above, please comment or
share your input.