procurement process:

1. Procurement Planning
The first step involves assessing the procurement requirements at an enterprise level. The team evaluates
demand projections from various verticals and analyzes the previous year’s (historical data) expenses.
Further, the current market trends are analyzed, and risks assessed.

The procurement plan and sourcing strategy are then defined and developed for the year, including adopting
sustainable procurement practices. Eventually, procedural, budgetary and managerial approvals are
completed to implement the procurement plan.

Additional Read: Building Blocks of a Best-In-Class Procurement Strategy

2. Purchase Requisition or Indenting

Proper approvals must back any procurement activity as it involves an outlay of funds. The project head, the
end-user department and its head, and the budget approving authority must approve the purchase requisition.

3. Identify Suppliers
This step is critical as it involves selecting suppliers who fulfill the “Five Rights” objectives (Right Quality, Right
Quantity, at the Right Time, Right Place at the Right Price). It is crucial to assess the suppliers’ locations,
whether registered with the organization, reputation and credibility, capability to fulfill the order reliably,
response time to rush orders, and ethics. Some companies evaluate a vendor’s sustainability quotient too.

4. Float the RFQ

The Request for Quotations (RFQ) is floated to the list of suppliers shortlisted. The RFQ document contains
all the necessary information required for a supplier to

review and quote accordingly. The RFQ is issued when the company wants the lowest price for its
requirements.

5. Appraise the Quotes

Once all the quotations are received, they are appraised based on the cost of procuring the item, freight
charges, delivery terms, etc. A comparative assessment of the above parameters is tabulated for easy
decision-making.

6. Negotiate and Sign the Agreement

On successfully completing the supplier evaluation, a list of vendors is shortlisted and called for further
negotiations. Sometimes, organizations may appoint two or even three
vendors to mitigate risks. A mutually agreed contract is then drawn up and signed by both parties.

7. Release Purchase Order (PO)

The purchase order (PO) is released to the supplier/suppliers once the agreement or a contract is signed.
This document confirms the supplier/suppliers for the order.

8. Material Receipt and Quality Check

On delivery of the material, a physical inspection is carried out. The item is checked for the correct part, and
the quantity is verified. The product is then handed over to

the inspection authority for technical verification and quality as per the specification. The goods receipt note
(GRN) is created if the delivery is accepted. Any non-compliance based on the agreement is recorded and
conveyed to the supplier.

9. Invoice Approval and Process Payment

Once the delivery of goods is accepted, the three-way matching process is carried out – the supplier invoice
and packing list are matched with the PO for the terms and

conditions and the GRN for checking discrepancies. If no distinction is observed, the invoice is approved and
payment is released.

10. Maintain Records for Audit

Maintaining all the documents – policies, budget approvals, RFQ, quotations, comparisons, PR,
agreements/contracts, PO, invoices, packing lists and GRN – helps the organization in several ways.

For auditing and filing statutory and compliance requirements.

In case of any disputes, the records may be required to resolve them.

Data will be available for referral while reordering the items.

For referring to the data at the time of reordering.