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May 15, 2020 2 min read

Each organization makes decisions about buying and procuring every day. This would involve new product lines as well as all the needs that go with it. It would include the product itself, packaging, labelling, etc. The goal is to achieve targets in a limited time, maintaining quality and most importantly at an affordable price.

The procurement process begins with the understanding of what needs to be sourced. If it is an existing product that needs to be replenished, we can check the previous Purchase Order Request (POR), which is a legal binding document between the buyer and supplier with details of purchase and the price agreed on. If at this stage we feel that we need to find another supplier due to price variation, lack of stock or quality, we can treat it as a fresh sourcing requirement.

For any new procurement requirement, it is important to take a 360 degree approach:

  1. Study and research about the product.
  2. Understand the price point in the market.
  3. Speak to several leads that can be generated by a simple Google search.
  4. Learn about its different components.
  5. Comprehend its packaging requirement.
  6. Send enquiries and receive best quotations from vendors. 

When receiving vendor quotations there are several details that one should request: 

  1. Price per quantity
  2. Lead time
  3. Transportation Options and Terms
  4. Payment terms
  5. Request for sample to check the quality.

This is when it starts to get a bit fun! We receive the samples and start the negotiation process. Since we have received several quotations, one can roughly understand the price point of view. We then start by calling the vendors that can match quality with the price perspective. The discussion with the vendor should be about the product cost, understand the lead time. Try to have a quote that includes transportation as variable rates make it complicated in the long run. These particular steps are paramount in cost saving for the organization.

Once we select the vendor, this is when the POR is created to initiate the process on the order. The POR must contain all the details of fulfilment discussed. Follow up with the vendor at regular intervals. Once the goods are received, a Quality Check (QC) is done in case of damaged goods, bad quality as compared to sample, quantity mismatch, or any other issues not matching the POR.

After completion of QC, the last document is to be issued by us to the vendor, a Goods Receipt Note (GRN). This is a note that records the quantity and quality of product received that is created against the POR. In case of any issues, excess or short quantities a debit/credit note needs to be created against the POR. Once everything is in order, one can release the payment as per the agreed terms with the vendor.

The above process may have varied timelines based on time taken for selection, approvals, production and transportation. that covers the basic day-to-day activity of the procurement team.

Written By: Sayli Chandarkar
Head - Sourcing & Purchase - Thinkpot


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