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In today's fast-paced world, procurement professionals are the unsung heroes of each organization. But what distinguishes the procurement team from others in an organization? The solution is to learn and perfect the 7-step procurement guide.

Procurement is more than just buying and selling; it also includes strategic sourcing, negotiating, stakeholder collaboration, minimizing risks, data analysis, and other activities. In this post, we will walk you through a 7-step method that will provide significant insights, beginning with identifying the requirement and progressing to tracking invoices and analyzing spending. Consider a guide to assist you navigate prospective growth prospects. That is something we are attempting to explore in this post. Mastering these steps will help you understand and transform your procurement process from good to great.

1) Identify the requirement

 Department to determine the organization's needs, understand the criteria and create a clear description of what needs to be purchased. Quantity, quality, delivery deadlines, price, source, and other factors will be looked at. For example, if an organization needs to purchase chairs for a newly opened office, it is critical to first determine the type of chairs needed, as well as the quantity, price, delivery schedule, and so on before reaching out to a potential supplier.

You get a high degree of visibility into all of the necessary spending in your business by doing this. As a result, you can list the areas of the company where you can attempt to reduce expenses and save money.

 2) Identify the supplier

 Every organization must engage in procurement activity daily to meet business needs. When a need arises, the procurement team will begin looking for suitable suppliers to supply the goods/services. The procurement team will consider the two options listed below.

  •  If there is a suitable supplier to deliver the goods/services, the procurement plan will be continued.
  • If not, they must locate one.

The vendor is chosen based on the type of goods/services that the organization intends to purchase. Overall, selecting the right suppliers for procurement requires a systematic and objective approach that takes into account your specific needs and the capabilities of potential suppliers. It's essential to evaluate potential suppliers' reliability, financial stability, quality, and reputation to ensure that they meet your organization's procurement needs.

To meet their requirements, companies will obtain RFI, RFQ, and RFP from the vendors to compare their products and services. These documents would help the companies to identify the right vendor. Let us see the differences between RFI, RFQ, and RFP.

  •  RFI (Request for Information)

RFI is a fact-finding document. Companies would use RFI when they don’t know the marketplace. RFI would help to understand the range of options in the market. It consists of the kind of products, fees, and the industry it specializes. etc.

  •  RFP (Request for Proposal)

RFP is a detailed questionnaire used by the company to collect critical information from the vendors on the products and services.

  • Request for Quotation (RFQ)

 RFQ or Request for Quotation is a document sent by the buyer to the seller to request pricing information for the specific product or services that they intend to buy. An RFQ generally contains the following information.

1) Buyer details
2) List of goods/services to be procured
3) Delivery details
4) Pricing terms
5) Payment terms
6) Contact information of the buyer

The contents of a specific RFQ are based on the type of goods/services that are going to be procured. There are different types of RFQs, they are

  •  Standard

Used to procure goods/services based on the list of items requested by the buyer, and suppliers are asked to submit quotations based on those specifications.

  •  Open Ended

Buyers furnish general information about their requirements and request vendors to propose solutions.

  •   Closed Ended

Buyers provide detailed and specific information and request vendors to adhere to only those requirements.

 3) Negotiate the contract

A negotiation is a formal discussion in which you will debate the terms of a contract. It is a process in which two parties of different thoughts get together and mutually agree on an outcome. Before getting into a negotiation one must ask these questions, Should I negotiate? Is this a position-based or interest-based negotiation? Am I trying to resolve a dispute or make a deal? How should I analyze a negotiation? How should I handle ethical issues? Should I use an agent to negotiate for me? Negotiating the terms and conditions with the supplier on pricing, and delivery schedule, and understanding each party's end goal will help mutually arrive at a win-win situation and finalize the deal.

The process of negotiation involves the following stages:

Clarification of goals
Decision making

4) Implement and finalize the contract

Once both parties have agreed on all of the terms and conditions, the contract will be finalized. Both parties must thoroughly analyze the agreement before finalizing it. The legal team must approve the agreement and confirm that it complies with the organization's norms and regulations. Once all necessary adjustments have been made, the final document can be completed and signed by authorized representatives from either party.

 5) Onboarding of a vendor/vendor empanelment

The process of registering and evaluating vendors or suppliers to become a part of a preferred supplier list for a specific organization or entity is known as vendor empanelment. This process entails evaluating vendors based on a variety of criteria such as quality, price, delivery times, customer service, financial stability, and regulatory compliance.

Empaneled vendors are typically expected to provide goods or services to the organization on an ongoing basis. Empanelment can be obtained through a formal application process or by invitation and may necessitate background checks or the provision of proof of qualifications and experience. Organizations can streamline their procurement process by empaneling vendors, reducing the time and effort required to find suitable suppliers.

It also ensures that the organization is working with dependable and trustworthy vendors who can consistently provide high-quality products or services at reasonable prices. Some common documents that vendors may be required to submit during the empanelment process include:

 1) Vendor empanelment form (VE form)
2) Bank Details
3) Registration certificate
4) Government registration documents
5) Company profile, like product/services offered, history, mission statement, etc.

 The documents required for vendor empanelment can vary depending on the organization and the type of goods or services being procured.

6) Review supplier performance

Setting the appropriate target for the supplier is critical to evaluating their performance. This helps vendors understand what is expected of them and deliver accordingly. The goals must be SMART (Specific, Measurable, Achievable, Relevant, and Time-bound). Key Performance Indicators (KPIs) are vital for measuring performance, and tracking them on a regular basis allows you to discuss the results with your provider. Focusing on KPIs is critical for meeting business objectives and developing a long-term relationship with the vendor.

Here are some common KPIs used to evaluate vendor performance:

  •  Customer Satisfaction

Obtain input from all relevant stakeholders on the vendor's performance and product/services, as well as any suggestions for improvement.

  •  Innovations

Vendors must be adaptive and open to new ideas to improve the process and satisfy market demand while also assisting businesses in developing long-term relationships.

  •  Price Variance

Maintain a close eye on pricing fluctuations from time to time to determine long-term cost savings., maintain profitability, adhere to budgets, ensure contract compliance, and drive continuous improvement in the long run.

  • Quality of Goods/Services

Keep track of the amount of flaws in the products/services that are supplied. Check to see if the delivery schedules are meeting on time.

  •  Financial Stability

Assess the vendor's financial stability and profitability to meet the business requirements and long-term viability.

 7) Analyze the expenses/data

Organizations cannot make major business decisions without having historical data. All the major business decisions are being made based on historical data. It is critical to understand how to use data. Data can take numerous forms; some technologies can convert data into a graphical mode and then conclude. Ex: Power BI, SQL, etc Data analytics is important in optimizing the procurement process since it provides spending patterns, supplier performance, and other information that allows the company to make informed decisions. By leveraging data analytics organizations can achieve several benefits.

 Steps to create an effective procurement strategy

Procurement strategy depends on numerous factors like availability of budget and the right suppliers, the risk involved, purchase timeline, etc. An effective procurement strategy would help reduce errors, save costs, ignite unnecessary spending, and ensure compliance.

 Nine ways to deliver a successful procurement strategy are as below:

  •   Implement software

It helps to streamline the end-to-end process, eliminates the number of human errors, and improves productivity.

  •   Analyze the organization's spend

Data needs to be obtained from all the stakeholders to analyze the existing spending.

  •   Determine business needs

Understand the organizational needs based on the analysis done.

  •   Assess market condition

Data to be collected from the vendors based on the needs identified to understand external factors like the supply market and their conditions.

  • Set clear objectives

Focus on the improvement areas. SWOT analysis can be done to understand the current state of procurement function.

  • Define procurement policies

Modify the existing policies based on the SWOT analysis done.

  • Outline a procurement strategy

Goals need to be set based on the data and information obtained. This has to be a realistic and measurable one.

  •  Develop a digital procurement strategy

It helps to give better visibility, reduces risk, improves spend under management, and drives more value for the organization.

  •  Execute, manage, and refine strategy

Execute the digital procurement and involve other stakeholders. Track and measure the strategy to identify the success of implementation.

Steps to Develop a Procurement Strategy

What is the difference between procurement and buying?

When it comes to acquiring goods/services, it is a general practice to use “Buying” & “Procurement" interchangeably. Let’s visit the difference between both here:


 It is a set of processes that are executed to buy goods/services for an organization. They are as below:

 1) Identifying business requirements.
2) Identifying, evaluating, and selecting the right vendors.
3)     Negotiation with the vendors.
4) Verifying the supply and ensuring compliance.


 It is a set of processes that are executed between the organization and the supplier to buy goods/services. They are as below: 

1) Placing an order
2) Tracking the order
3) Goods/service receipt and verifying the order
4) Making payment for the order.

In short, Procurement comes into effect when there is a business requirement of procuring goods/services, whereas purchasing starts and ends with placing an order and receiving it.

The seven-step plan assists the organization in achieving its goal, reducing costs, improving efficiency, developing a long-term relationship with the supplier, and ensuring that the final business aim is fulfilled. There are three key ways a procurement specialist can bring value to the firm.

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Assistant Manager F&A, Infosys BPM
Finance professional and P2P specialist with over 18 years of industry experience in IT, insurance, and NBFC. In my present work, I assist the team and organization in achieving their goals and improving the process through automation and adjustment as needed depending on business requirements. Excited about taking on new challenges and aiming to enhance the process through close collaboration with the team. Also, contribute to the LinkedIn community by sharing knowledge and building connections with like-minded people. Aside from work, I love to travel and take images and videos. Watching movies, cricket, cooking, family time, playing with kids, and so forth.
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