Purchasing process is one of the most important processes in any organization. The purchasing process is the acquisition of services of product against certain requirement and making payment for the same as per agreed terms.
There are 3 main stakeholders in the process:
1. The user i.e. who needs the service or product
2. The purchaser or the buyer
3. The service provider or the supplier/Vendor
- Purchase Requisition
- Request for Quotation
- Purchase Order
- Goods Receipt
- Goods Receipt Invoice
- Invoice Verification
- Payment to Vendors
1. Request for Requisition: The user group i.e. the function who is needs the service or product. For example, if a cutting tool required for a machine, then the line manufacturing manager or supervisor is the user and the operation team is the user group. The following basic information are required to buy this tool:
a. The specification : The cutting tool is required for a particular machine hence it does have a specification.
b. Quantity : Does he need just one piece or many !
c. Time : When does he want ? Immediately or before certain date!
All the above are put in a way such that the buyer gets to know about the requirement. Either it can be communicated thru paper-based form or electronic form such ERP system.
2. Request of Quotation (RFQ): The buyer collects the above information and collate in a way such that there is a clear requirement which can be understood by the supplier. Many a times, the buyer makes an error in sending the RFQ with less or incomplete information which creates difficulty for suppliers. The RFQ is a process of seeking the commercial quotation or price information of the product or service from the suppliers. In this case, the cutting tool which is required by manufacturing manager.
The RFQ must contain following information if not more:
a. Name or title of the product
b. Product code if any
c. Specification or data sheet
d. Related drawing or images
e. Quantity
f. Deadline to send quotation:
g. Delivery Days or Date:
g. Any other terms and conditions such as delivery conditions, packaging, cost break-up, manufacturer details etc.
The best practice is to create templates for the RFQs for different products and services. It is advisable to provide another template or blank format which needs to be filled up by the suppliers and sent back as quotation. You can ask suppliers to attach any additional documents to support the quotation.
3. Quotation analysis and Finalization of supplier: The buyer collects the few quotations from various suppliers in the asked format. Now, the quotations or price need to be compared and the best supplier to be selected based on cost, delivery lead time and source reputation.
The best practice is to have a template for quote comparison based on the prevailing practice in your organization. Some companies try to compare the unit price of the product whereas the best practice is to compare the total cost of acquisition (TCA) or total cost of ownership (TCO) of various suppliers. The supplier with least TCO should be selected for your purchase requirement.
End of Part 1.
Purchasing training for SME & Professionals in India
Whatever we gathered information from the blogs, we should implement that in practically then only we can understand that exact thing clearly, but it’s no need to do it, because you have explained the concepts very well.
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