How does the purchasing process work in your business?
In general, purchases occur very similarly in most small, medium or large businesses. This is because the procedure is quite similar, and what changes is mainly the size and volume of orders, depending on the performance of each company. Check below the steps of the purchasing cycle that are often repeated out there, and how each should work – in theory.
The purchasing process in theory
1. Purchase requisition analysis
This is the first moment of the cycle. Here, the purchasing department receives a requisition, a document that expresses the need that another department or employee has for a product. Upon receiving it, the purchasing manager must review the actual need for that purchase, as well as the specifications, quantities and delivery date required. With this information in hand, the purchasing department moves on to the next step.
2. Selection of suppliers
At this stage, an extensive search is conducted to raise possible suppliers for the required purchase. Here, the purchasing department must check all the suppliers already approved, that is, that already have active service contracts. In case of a first purchase, it is necessary to search for new suppliers and to check prices and conditions of payment, delivery and support. It is the role of the purchasing department to find the supplier that offers the best conditions, and that does not necessarily mean the lowest price. After the choice of supplier, the purchase order is issued.
3. Issue of the purchase order
The purchase order is issued, sent to the supplier and to the accounting department, in addition to the ordering department and also the one that will receive the shipment. From now on, it is necessary that the purchasing department accompany the process, ensuring that delivery is made within the given time. If any problems occur, by following the process closely the purchasing department can get around the situation more easily and quickly.
4. Delivery of the order
When receiving the goods, it is necessary to inspect and verify that the requested specifications are in order, as well as the right quantity and the conditions of delivery – if there are no defects or damages caused by transport. If everything is in order, the good is forwarded to the requesting department or to the company stock, and the purchase order and a receipt report should be forwarded for billing to the accounting department.
The purchasing process in practice
By following these steps, everything should work in order, right?
Wrong. Remember that at the beginning we said that these steps are the way things should work? Yeah. Each of these steps has its risks, and however closely the procedures are followed, the entire operation can be compromised by a slight oversight or slip. And, in the business’ daily flow, problems in the process are more common than we would like, especially in large companies dealing with many requisitions and deliveries simultaneously.
There are simpler and safer ways to perform each of these steps, to ensure that they occur correctly, and to make your purchasing process really effective. Check them out:
1. Purchase requisition analysis
By establishing protocols and properly training employees, the chances of errors in completing and submitting a purchase requisition are noticeably reduced. Requisition data are critical to the supplier search procedure and purchase decision, and misfiled or erroneous information can undermine the entire process. It is interesting to invest in ways to automate this step of the purchasing cycle, reducing paperwork and making the activity of submitting a request more optimized and simplified.
2. Selection of suppliers and Issue of the purchase order
Here’s a golden hint! A purchasing department in a large company handles hundreds of purchase requisitions per week, which ask for the most different types of goods, which will come from several different suppliers. The person responsible for the requisitions should analyze each of them individually, categorize them, search for specific suppliers for each of the reported needs, search for the best prices in the national and even international market… It is already tiring to read, isn’t it? That’s where the danger is!
To facilitate this part of the process, there are companies that specialize in the purchase of materials for maintenance and replacement parts, that go after the best suppliers around the world and find the best prices and conditions to meet your needs. So you can focus multiple orders in one place, reducing the number of different purchase orders, making the process more organized.
Closing partnerships with this type of company is very valuable to your business, since it reduces the workload of the purchasing department, streamlines the routines and allows the process to be conducted in a more coordinated manner. It’s a typical example of a win-win situation!
And by optimizing routines, purchasing managers are given more time to deal with other procedures, such as the better organization of the purchasing documentation, which has a direct impact on the control of each supplier’s deliveries and deadlines.
3. Delivery of the product
With less paperwork to handle, it’s easier for the purchasing manager to track supplier deadlines and deliveries, paying more attention to this step of the process. As a result, the risk of problems going unnoticed decreases, closing the purchasing cycle with a golden key!
It’s also important to say that most of those companies we cited in the last topic manage to also take care of transportation, making everything easier for you and your business!
How to purchase effectively
In this article we showed you how the purchase cycle should work in every company, the problems usually found in each step and how one can ensure that the process runs without many disturbance. Here, you’ve learnt that the primary concern must be to easy the parts than can be eased, by optimizing routines and getting rid of unnecessary paperwork.
Companies that participate in the purchasing process with you, searching for new suppliers worldwide and ensuring the best conditions for your business’ needs are the best way to turn the purchasing cycle into a well handled and guided process. By doing that, you leave the purchasing department free, to worry about other steps that are as essential to your company’s success as the purchases are.