Purchasing process

Purchasing process

Purchasing is the formal process of buying goods and services. The Purchasing Process can vary from one organization to another, but there are some common key elements.

The process usually starts with a 'Demand' or requirements[1] – this could be for a physical part (inventory) or a service. A requisition is generated, which details the requirements (in some cases providing a requirements speciation) which actions the procurement department. A Request for Proposal (RFP) or Request for Quotation (RFQ) is then raised. Suppliers send their quotations in response to the RFQ, and a review is undertaken where the best offer (typically based on price, availability and quality) is given the purchase order.

Purchase orders (PO) can be of various types[2], including:

  • Standard - a one time buy;
  • Planned - an agreement on a specific item at an approximate date; and
  • Blanket - an agreement on specific terms and conditions: date and quantity and amount are not specified.

Purchase Orders are normally accompanied by Terms and Conditions[3] which form the contractual agreement of the Transaction. The Supplier then delivers the products/service and the customer records the delivery (in some cases this goes through a Goods Inspection Process). An invoice is sent by the supplier which is cross-checked with the Purchase Order and Document which specifying that the goods received. The payment is made and transferred to GL.

References

  1. ^ Purchasing and Supply Chain Management Kenneth Lyons and Michael Gillingham ISBN027365764X
  2. ^ Purchasing Handbook: Standard Reference Book on Purchasing Policies, Practices, Procedures ... By George W. Aljian
  3. ^ Purchasing Process design

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