How does Contract and Purchasing Management work?
1- Needs Recognition
- The needs recognition stage of a procurement process enables businesses to sketch out an accurate plan for procuring goods and services in a timely manner and at a reasonable cost.
2- Purchase Requisition
- Purchase requisitions are written or electronic documents raised by internal users/customers seeking the procurement team’s help to fulfill an existing need. It comprises key information that is required to procure the right goods, services, or works.
3- Requisition review
- The procurement process will commence only after the purchase requisition is approved and cross-checked for budget availability. In the review stage, functional managers or department heads review the requisition package, double-check if there is a genuine need for the requested goods or services, and verify whether necessary funding is available.
4- Solicitation process & quotation
- Once a requisition is approved, the procurement team will develop an individual procurement plan and sketch a corresponding solicitation process. The scope of this individual solicitation plan ultimately depends on the requirement’s complexity.
- Once the budget is approved, the procurement team forwards several requests for quotation (RFQ) to suppliers to receive and compare bids to shortlist the perfect supplier.
5- Evaluation and contract
- Once the solicitation process is officially closed, the procurement team and the evaluation committee will review and evaluate supplier quotations and delivery times to determine which supplier will be the best fit to fulfill the current need.
- Once a supplier is selected, the contract negotiation and signing are completed, and the purchase order is forwarded to the supplier. A legally binding contract activates after a supplier accepts and acknowledges a PO.
6- Order management
- A purchase order is issued to the selected supplier either against the newly executed contract / standing agreement / list price. The supplier delivers the promised goods/services within the stipulated timeline. After receiving them, the purchaser examines the order and notifies the supplier of any issues with the received items.
7- Invoice approvals and disputes
- Once all the verification of goods/services and documents are done, the invoice will be approved, and the supplier will be issued payment.
8- Maintenance of vendor relations
- The quantum and frequency of the transactions with the same key suppliers provide a platform for the purchasing department to establish and maintain good relations develop mutual trust and confidence in the course of time which is beneficial to both parties.