The Procurement Management Process in Organizations and Companies

Many organizations manage procurement processes that enable optimal utilization of the organization’s resources and a high level of service, reflected in supplying the output to the right place and at the required time.

One of the central links in the supply chain in organizations is the procurement department. The department is responsible for engaging with suppliers, receiving price quotes, and selecting the most cost-effective offer for the organization.

Who are the role holders in the procurement department in organizations?

The procurement manager – responsible for the entire process and for managing the periodic procurement budget (quarterly/annual/monthly), i.e., how much the organization spends on purchasing goods and services from its budget. The procurement manager is the one who approves significant orders and approves the establishment of contracts with various suppliers. They are the direct manager of the buyers.

Buyers – a vehicle buyer, for example, is an operations professional who is responsible for responding to the organization’s various demands by turning purchase requisitions into purchase orders, receiving quotes from suppliers, and selecting the most relevant offer, which will give the supplier a competitive advantage over its competitors based on a combination of product quality, technology, compliance with required timelines and quantities, and price.

What types of purchase orders exist?

Standard order – a one-time order from a supplier for receiving a service or product in a required quantity and on a specific date.

Blanket order – a periodic contract with a supplier, which defines the required quantities for a predefined period.

What training is required for managers and employees of the procurement department?

The required training is logistics knowledge, ranging from academic degrees in the field to professional courses on various information management systems, including ERP systems.

The ability to create orders, send requests for quotes, create orders from quotes, turn requisitions into orders, manage negotiations with suppliers, and choose the most cost-effective offer for the organization, even if it is not the cheapest.

Description of the stages of the procurement management process in a medium-sized to large organization

1. Creating a requisition in the system and/or a request via email from a role holder in the organization asking to receive a service or goods for business activity.

2. Transferring the requisition to a buyer in the procurement department, and examining how the requisition can be budgeted. Is there a designated budget in the organization? Is this a framework budget that can be used to fulfill the requisition?

3. Selecting a supplier from a supplier list, or requesting price quotes from suppliers, and choosing the most cost-effective offer for the organization.

4. Converting the requisition into a purchase order, selecting the items and quantities required for the order, defining the supplier, defining the date for receiving the goods and the delivery destinations, defining the currency in which payment for the order will be made, performing currency conversions if required, adding relevant notes to the order, and sending the order for approval by the procurement manager.

5. The order arrives at the company’s warehouses and is received in the system using the supplier’s delivery note.

6. The accounting department issues a receipt tax invoice for the supplier.

The procurement management process in an organization is central to every organization and enables its continuous and proper logistical operation.