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The thirteen steps of the procurement process

Use our step-by-step guide to help you through the procurement process

What are the steps of the procurement process?

The procurement process is defined as the steps the procurement team must take to acquire the right products and services for the organisation. It’s important to recognise that the procurement process will differ between organisations and will depend on:

  • Business model
  • Company size
  • Location
  • Company structure
  • Human resources
  • Budget and spending
  • If you’re involved in public procurement, then there will be strict laws and regulations that the organisation will need to adhere to.
 

Here are the key steps that form the base foundation of the procurement process.

Here are the key steps that form the base foundation of the procurement process.

Step 1: Define business needs and develop specification

The first step of the procurement cycle is to understand and define the business opportunity or business need.

  • Involve cross-functional stakeholders who will give you a wide range of expertise to develop a comprehensive specification.
  • Engaging stakeholders at this early stage will mean they will support the change process where stakeholder buy-in is required.

Step 2: Market analysis and make or buy decision

The next stage is to conduct market opportunity analysis, to assess the market options available to you.

  • Scoping your spend and current position will help you identify potential suppliers and competition.
  • Here you can decide whether to make or buy the product or outsource the service.

Step 3: Develop the strategy and plan

Your strategy and plan should consider the potential impact of the external environment

  • Conducting a competitive tender is a good idea if there is some wider competition
  • Developing competition in the marketplace or bringing this in house, may be a better strategy if you’re reliant on one source of supply.

Step 4: Pre-procurement market test and engagement

This stage involved identifying both stakeholder and business needs. Thinking about how changes to implement the procurement strategy can meet those needs flexibly.

  • Consider other factors such as crop cycles, competitor activity, suppliers’ end of financial year or new legislation

Step 5: Develop documentation PPQ and detailed spec

Spend time developing the tender documents. Include a detailed breakdown of the volumes, service level agreement and any terms and conditions.

  • Distinguish in your specification between product requirements and preferences
  • Create a detailed spec to ensure consistency on pricing, quality, and operations. This means products will be fit for purpose, reducing the financial impact of any wrong specs.

Step 6: Supplier selection to participate in tender

Conduct a Request for Information at this stage as it will help you to gain insights into suppliers.

  • Assessing the criteria will help you determine if the suppliers should be included in the tender process and a receive a request for quotation

Step 7: Issue tender documents

Once you have selected the suppliers, you need to send formal documents.

  • Send an invitation to tender and request for quotation
  • Include detailed specs and documentation that have been developed around the business requirements. Don’t forget to include clear timescales too of when they should respond.

Step 8: Bid and tender evaluation and validation

Once tenders are submitted, it’s time for bid evaluation and validation against a pre-defined award criteria.

  • Ensure your tender evaluation is structured and transparent
  • Post-tender negotiation will often take place
  • Consider the whole life costs, including removal and disposal

Step 9: Contract award and implementation

Once you’ve selected your supplier, a contract will be awarded. This forms the foundation to manage the relationship.

  • Award criteria offers agreed terms and conditions that will help minimise risks and exposure
  • Set out clear timescales and parameters on both sides to manage the contract

Step 10: Warehouse, logistics and receipt

Warehouse operations need to be a smooth and efficient process. These can include:

  • Product coding and classification
  • Space, layout, and racking
  • Frequency of deliveries

Step 11: Contract performance and improvement

Contract performance should be monitors and reviewed at agreed periods.

  • Set out KPIs (Key Performance Indictors) in the contract
  • Include discussions on how the relationship is working and resolve any conflicts
  • Discuss plans for continuous improvement

Step 12: Supplier relationship management

Review your portfolio of suppliers to develop the relationship and achieve objectives.

  • SRM (Supplier Relationship Management) helps to create the right relationship and environment to work on innovative developments
  • Having the right relationship may be the different between being the first to market or ensuring continuity of supply

Step 13: Asset management

Assessment should be carried out to determine if business requirements have changed and if the agreement is fit for purpose.

  • This will take you back to start of cycle and it will begin again
 

Improving the procurement process

The procurement team should look at ways to improve efficiencies and output of the procurement process. Here are just some ways that you could look to implement to smooth out the procurement process.

  • E-procurement software: This can help you to streamline your procurement process as it has a catalogue of approved suppliers.
  • Performance monitoring: Regularly review the performance of your suppliers and communicate with them to see if they need anything to help them run more efficiently
 

What is procurement?

Procurement involves the buying of goods and services that enables an organisation to operate their supply chains, in a profitable and ethical manner. Explore deeper into how procurement is defined, the role it plays and a how a career in procurement can benefit you.

Procurement key themes

Purchase Requisition Procurement policies New product development Big data in procurement
Socially responsible procurement How to write a contract Procurement KPIs

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