Answer to Question #170745 in Management for Sinethemba

Question

discuss the process that the purchasing department followed to arrive at approved suppliers

Answer 1

Like people, organizations and businesses need to purchase services and goods to meet their needs promptly. But businesses need formalized purchasing process to extract maximum value from every coin spent. The way the company develops and implements the purchasing strategy has a major impact on expenses, competitive performance, efficiency, and profitability.

The best practices for purchasing process include: 

1. Need analysis. At this phase, the organization recognizes and documents the need for services and goods to solve a particular challenge.
2. Purchase Requisition to Purchase Order. At this stage. At this stage, the purchase requisition is submitted to the purchasing department. Contained in the purchase requisition are the details on the items or services needed.
3. Purchase Order Review and Approval: the purchasing department reviews and approves these items. When approved, purchase orders are sent to accounting to verify the funds available in the budget to cover the requested services or goods.
4. Requests for Proposal: Purchase orders that receive budget approval are then returned to the purchasing department and they are used to create a request for proposal. They are then dispatched to vendors to solicit bids to fulfill the order for services and goods. The potential suppliers submit their bids and the bids are carefully reviewed based on compliance records, performance history, and essential features such as reputation, price, and average lead times.
5. Contract Negotiation and Approval. The vendor who wins the bid is awarded the contract. The process is further refined before signing. This ensures optimal terms and conditions to ensure both parties are satisfied. The signing legalizes the purchase order.
6. Shipping and Receiving. At this stage, the supplier delivers the items within the agreed-upon time. Then goods are reviewed to ensure that the goods or services received meets the organization’s need.
7. Three-Way Matching: at this level, the comparison of shipping documents is done. this process ensures the accuracy of the transactions.
8. Invoice Approval and Payment: orders that are successfully matched are approved for payment.
9. Accounting Records Update: Completed orders are recorded in the company’s books, and all documents related to the transaction are securely stored in a centralized location

The above steps help the organization to arrive at approved suppliers.