What is Procurement? | Procurement Process #procurement

Summary

This video provides a comprehensive overview of procurement, covering its definition, importance in business, and the detailed process involved. It explains the steps from identifying a need for goods or services to the final payment and record-keeping. The video also highlights the differences between direct procurement (raw materials for manufacturing), indirect procurement (operational services), and service procurement (contingent workforce and consulting services). Viewers will gain a clear understanding of how procurement functions within organizations and the various stages it entails, ensuring efficiency and smooth business operations.

Takeaways

• 😀 Procurement is the process of acquiring goods and services from third-party vendors through various methods like direct purchasing, competitive bidding, or tendering.
• 😀 Procurement is essential for businesses, enabling them to acquire goods or services required for their operations or production of final products.
• 😀 The procurement process includes steps like identifying needs, sourcing, negotiating, ordering, receiving, and making payments.
• 😀 The procurement process varies between businesses because each company has unique needs and processes based on their requirements.
• 😀 Step 1 in the procurement process is identifying the requirement, which involves recognizing the need for a specific item or service.
• 😀 Step 2 is determining the specifics of the requirement, including technical specifications and part numbers for accurate purchasing.
• 😀 Sourcing, Step 3, involves researching potential suppliers, evaluating them on reliability, speed, quality, and price.
• 😀 Negotiating and finalizing the price and terms with vendors is Step 4, where a minimum of three quotes is recommended for direct purchases.
• 😀 The purchase requisition and order process (Step 5) involves generating a requisition, getting approval, and creating a purchase order.
• 😀 Step 9 focuses on the payment process, where the payment is made after confirming that the product or service received matches the purchase order, and discrepancies are resolved.

Q & A

What is procurement?

Procurement is the process of acquiring goods and services from a third-party vendor through direct purchasing, competitive bidding, or tendering, while ensuring the right quality and quantity.

Why is procurement important for businesses?

Procurement is essential for businesses as it helps acquire the goods and services necessary to create a final product. It ensures that companies can obtain the required resources at the right quality and price.

What are the main steps in the procurement process?

The main steps in the procurement process are identification of requirement, determination of specifics, sourcing, negotiation and finalization of price and terms, purchase requisition and order, delivery of purchase order, expediting, receive and inspection, payment process, and record-keeping and review.

How does the procurement process vary between businesses?

The procurement process can vary from business to business depending on their unique needs and requirements. Each organization has a specific flow that best suits its operations.

What is the purpose of a purchase requisition in the procurement process?

A purchase requisition is generated within the company to request the procurement of goods or services. It must be approved by the appropriate authority before a purchase order is generated.

What is the difference between direct procurement and indirect procurement?

Direct procurement refers to purchasing raw materials or inputs required for manufacturing a product, whereas indirect procurement involves acquiring goods or services that are necessary for daily operations but not directly used in manufacturing, like office supplies or maintenance services.

What does the term 'service procurement' refer to?

Service procurement refers to acquiring and managing contingent workforce and consulting services, such as professional services or software subscriptions.

What happens during the expediting step of the procurement process?

During the expediting step, a timeline is created to ensure the prompt delivery of the requested goods or services, factoring in any unforeseen delays. It may also include information on payment and delivery schedules.

Why is it important to inspect the delivered items in the procurement process?

Inspecting the delivered items is critical to ensure that the goods or services match the agreed-upon purchase order. If the items do not meet the specified requirements, they can be rejected or returned.

How does a business handle payments in the procurement process?

Once the items or services are delivered and accepted, the payment process begins. Any discrepancies between the order and the delivery must be resolved before payment is made, following the agreed-upon payment methods.