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Procurement Involves
Selecting Vendors
Establishing Payment Terms
Strategic Vetting
Selection & Negotiation of Contracts
Procurement is concerned with acquiring (procuring) all of the goods, services and work
that is vital to an organization.
As a quick refresher, our friends at entrepreneurial-insights.com have
published a particularly lucid explanation of the facets of corporate strategy.
Facets of corporate strategy
Corporate Strategy
Company Identity
Market Placement
Company Capabilities
Management Issues
Company identity attempts to address these questions:
• What does our company want to do?
• What does our company stand for?
• Does our company have any specific ethical beliefs that will determine our business model?
Market placement attempts to address these questions:
• Who are our customers?
• What do they want?
• What do they believe in?
Company capabilities attempts to address these questions:
• What are the strengths and weaknesses of our company?
• Do our strengths support the long-term goals of the company?
• How do we want to grow the company?
Management issues attempts to address these questions:
• Do we need to hire / develop talent to lead the business to the goal we’ve established?
• Does the company have the resources (equipment, real estate etc.) needed to support the long-term goals of the company?
This is a great breakdown of corporate strategy because procurement touches
each of these components
If your business is building (or has built) its identity around an environmentally conscious ethic, than your
procurement strategy must reflect that decision
Steps in the procurement process• Identification of Requirement• Authorization of Purchase Request• Final Approval of Purchase Request• Procurement• Identification of Suppliers• Inquiries• Receipt of the Quotation• Negotiation• Selection of the Vendor• Purchase Order Acknowledgement• Advance Shipment Notice• Goods Receipt• Invoice Recording• 3 Way Match• Payment to Supplier
Using purchase orders (especially those generated by an e-procurement software solution) is critical, regardless of the size of your organization. Don’t simply use your credits cards and save the receipts. Don’t rely on emails.
The purchasing process
• Purchase Order Acknowledgement• Advance Shipment Notice• Goods Receipt• Invoice Recording• 3 Way Match• Payment to Supplier
Purchasing, then, is a subset of procurement. And as we’ve outlined, purchasing generally refers to buying goods or services. Purchasing often includes receiving
items and payment as well.
Unlike the entire procure-to-pay cycle, the steps explicitly related to purchasing should not be tailored to suit the size and scope of each individual business.
Conclusion:
Procurement deals with the sourcing activities, negotiation and strategic selection of goods and services that are usually of importance to an organization.
Purchasing, however, is the process of how goods and services are ordered. It is usually described as the transactional explicit function of procurement for goods or services.
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