1.

Standard Operating Procedures (SOPs) for import Department

A import department is to manage the procurement of the materials required

for importing operations from suppliers. However, such a narrowed-down
description hardly reflects the complexities of managing the purchase function of a
company. Behind ensuring a steady flow of medicines , a purchase department needs
to run several processes flawlessly. If these processes are faulty it could lead to many
undesirable circumstances like the selection of ineligible suppliers, misunderstandings
about expected results, over-purchase or under purchasing, failing to order on time,
etc.

From selecting the right suppliers to managing returns, every key activity of a A
import department can be made process-driven with SOPs. Simply, this can be
referred to as the manual for the procurement of goods or the SOPs for the this
department.

Suppliers and vendor Selection & Shortlisting Process

There should always be a planned and systematic process for shortlisting and
selecting suppliers. The suppliers shortlisting process can be mapped in the form
of Standard Operating Procedures. There could have different strategic requirements
in terms of past experiences , quality of materials, quantity of supply, transit time,
logistical priorities, regulatory factors, pricing and financial terms, and so on. These
considerations need to find a place in the vendor selection process. These SOPs shall
also serve as a working map for the employees of the company who shall be involved
in the process. Once the vendor shortlisting SOPs are defined, there will hardly be any
scope for misjudgements or favouritism.

New Supplier Onboarding Process

The process of on-boarding a new supplier entails completing the documentation and
regulatory formalities and acquainting the supplier about the relevant policies of the
company and chalking out a detailed operational roadmap. Different companies may
have different approaches to how they carry out this onboarding process. Bigger
enterprises have lengthy procedures running into days or even weeks.

Having SOPs can simplify a complex and lengthy onboarding process. A well-
planned, systematic, and process-oriented approach will ensure that all the required
areas of work are duly undertaken and finished on time. These areas of work could be
documentation formalities, supplier details integration with the company’s IT
systems, fulfilling applicable regulatory compliances, meetings between company
officials and new suppliers, exit policies, etc.

Procurement Process and Adherence to Procurement Terms and Policies

How can a business enterprise ensure that the terms and conditions governing the
procurement activities are adhered to? If these parameters are not observed it could
lead to many undesirable anomalies like goods not received on time, quality is
compromised, faulty and unauthorized ordering, etc.
Procurement is probably the heart of a purchase department where requisitions
surface, approvals do the rounds, and procurement orders are placed following the
laid down procedures.

To place a procurement order, a purchase department needs to observe the laid down
rules and procedures. For example, it cannot place an order just because there is a
requisition from another department or division. It needs to be ensured that purchases
to be made are justified, approved, and within the confines of operational planning.

There will be approvals and clearances involved from concerned authorities. There
needs to be transparency in how a company is making its purchases. Even the private
sector is not free from corrupt practices. It is strongly advisable to have procurement
SOPs or purchase SOPs to define this process and how it should be carried out. This
can serve as a manual for the procurement of goods. Having a purchasing policy
manual, also expressed in SOP format, will make it easier for employees to proceed
systematically following the rules. Even in the case of regular suppliers, the
established processes must be followed. Having a stringent procurement policy also
ensures accountability.

Import Process

There can be a situation wherein your vendor is from a different country and
delivering overseas. These cases are altogether a different ball game as relevant
EXIM laws of the trading countries become applicable. Thus several external
components come into play here like custom formalities, insurance, paperwork and
documentation, foreign exchange, etc. These must-do elements need to be
incorporated into the purchase procedure. The benefit of all this due diligence is that
you will not have loose ends. With SOPs, your company and the purchase department
will know that both internal and external priorities stand addressed in the workflow.

Blanket Purchase Agreement (BPA) and Contract Purchase Agreements (CPA)

Blanket Purchase Agreement (BPA) is when the company knows what to buy, how
much to buy, and from which supplier they will be buying in a given period but is not
sure of the delivery schedules.

Contract Purchase Agreement (CPA) is a contract where terms and conditions are
decided but the goods and services to be procured are not specified.

BPA and CPA help companies secure procurement in the face of uncertainties. As and
when the requirement arises, pending terms are addressed, the orders are placed, and
the contract is obliged.

A predefined procedure to be followed when the time for implementing these

contracts arise could be immensely helpful for companies. Such a procedure could be
similar to a procedure for executing a standard purchase order.

Reorder Decisions (ROL Management)

Managing the required inventory levels, which can also be dynamic, is a critical job of
a purchase department. This stresses on how decisions are made on reordering and
ensuring that adequate stock levels are always maintained and business operations are
not affected. There are three basic questions which a purchase department needs to
answer on a routine basis.

 What to order?
 When to order?
 How much to order?

Wrong decisions here could lead to operations coming to a halt when there is no or
insufficient inventory left affecting production, operations, and sales.

SOPs can play a saviour here. If the specific parameters related to reordering levels,
reorder quantities, and reorder items are defined in the SOPs then this decision-
making will become easier and more accurate.

The direct impact of prudent reordering per SOPs is on the liquidity and the bottom
line (profit). With optimized purchasing via effective ROL management, higher
profits will be recorded even with the same level of sales.

Logistics Management

Logistics is that part of the supply chain management where the physical movement
or transportation of materials takes place. It can refer to movement of goods from
supplier to company, supplier to factory, supplier to the warehouse, company to the
customer, one warehouse to another, and so on. Logistics can be of five types or
stages of logistics:

 Procurement Logistics
 Production Logistics
 Sales Logistics
 Recovery Logistics
 Recycling Logistics

The logistical activities are carried out by a company’s logistics team or hired logistic
partners. Transportation can take place between states or even countries. The
geographical spread of the supply chain network and the number of intermediaries
involved defines the complexity of the logistics activities of a company.

At every stage of logistics, a company needs to ensure several aspects concerning the
materials being received, processed, and forwarded (next stage).

 Right source
 Right place
 Right time
 Right materials
 Right quantity
 Right quality and condition
 Right documentation, system entries
  Right inventory/storage
 Processing and dispatching
 Right destination

These parameters need to be incorporated into the working mechanism of the team
involved at every stage. And it could be done with SOPs.

Purchase R

eturn Process

Purchase returns are undesirable but with agreed terms of purchase and process being
followed, it should be a smooth operation for the parties involved. Following the due
process is important here on several grounds. For example, the purchase return
decision must also clearly convey why materials are being returned. And this
information, in case of defects, will be provided by the QC team. Purchase return
could also take place if consignment arrives beyond the acceptable time frame. All the
conditions and procedures of purchase return can be expressed and mapped with
SOPs making it easier for a purchase department to make the functional decisions

Purchasing Process:
Definition, Key Steps &
Best Practices
All businesses need to buy goods or services to meet their day-to-
day needs. If you don’t have a formal way of buying things and
services, you may be spending more than you need to. Here, the
purchasing process comes.

How you set up your buying process will significantly affect your
business, not just in terms of managing costs and expenses but also
in terms of how well it runs. Learning and using a few steps and best
practices for your buying process can help reduce waste and protect
your business from unnecessary risk and cost.

And you also can create workflows that make the most of every dollar
spent in terms of efficiency, profits, and value recovered.

Content Index hide

1 What is the purchasing process?

2 Importance of a purchasing process

3 What is the difference between the purchasing and procurement process?

4 Key steps of the purchasing process

 5 Best practices for the purchasing process

6 Conclusion

7 Frequently Asked Questions (FAQ)

What is the purchasing process?

A business’s steps to make a purchase are called the purchasing
process. Businesses usually have to go through a formal process
when they buy something. Also, when they want to buy something,
they may need to research, get input from different departments,
negotiate, and send out payments.

The purchasing process involves simple and essential procedures

that organizations and individuals use to buy things they need.

It may differ depending on how a company works and what it needs,

but the steps in this process usually include the following:

 Reviewing and approving requests for purchases

 Making and sending out a purchase order
 Negotiating prices, contracts, or how to pay for things
 Keeping track of spending

In the purchase process, many people are involved, such as

procurement and finance teams, requesters, approvers,
vendors/suppliers, and the purchasing and accounts payable
departments.

Importance of a purchasing process

The formal purchasing process is really important for you for many
reasons. Let’s break down some key points to understand its
importance:
 

Cost savings



The purchasing process is like your money-saving superhero. It

allows you to compare prices, seek out discounts, and negotiate
deals. This means you can get the best bang for your buck. With a
well-structured process, you can avoid impulsive buying and ensure
you spend your money wisely.

Quality assurance



You want to be sure that what you buy is worth your money. A proper
purchasing process lets you research and assess the quality of
products or services. It empowers you to make informed decisions,
preventing you from ending up with subpar items or shoddy services
that might disappoint you.

Legal protection



The modern purchasing process acts as your legal shield. It spells

out the terms and conditions of your purchase, which can be crucial if
any issues arise. It ensures that both you and the seller are on the
same page, reducing the chances of misunderstandings or disputes.
If something goes wrong, a clear process can be your ticket to a fair
resolution.

Efficiency and time management



Time is precious, and a structured purchasing process helps you
make the most of it. It streamlines your shopping or procurement
activities, making the entire process faster and more efficient. You
won’t waste time running from store to store or endlessly searching
for products online. Instead, you follow a well-organized plan that
saves you time and effort.

Transparency and accountability




The purchasing process is like a transparent window into your

spending. It keeps everything open and visible, essential for personal
finances and business operations. This transparency reduces the
chances of fraud or errors in your purchases.

You know where your money is going, why you’re spending it, and
who is accountable for each step of the process.

What is the difference between the

purchasing and procurement process?
Let’s talk about the difference between the purchasing and
procurement processes:

Purchasing process



When you’re in the purchasing process, you’re focusing on buying

things. It’s like going to the store and picking out the products you
need. This part is all about finding the best price, negotiating deals,
and making the actual purchase.

In a way, purchasing is like a one-time deal. You’re buying what you

need, and once it’s done, you move on. It’s more like a transaction.


 Procurement process



Now, think of procurement as a bigger picture. It’s not just about

buying stuff but also about the whole process of getting what your
organization needs. It includes finding the right suppliers, negotiating
contracts, managing relationships, and even thinking about the long-
term impact of your buying decisions by the procurement department.

Procurement is like a whole journey. It’s not just about buying things
once but managing your purchases over time. It’s a bit more
strategic, like planning for the future.

So, the main difference is that purchasing is like the short-term action
of buying, while procurement is the bigger, long-term strategy of how
your organization gets what it needs. Both are important, but they
focus on different aspects of the buying process.

In a larger organization, a dedicated procurement team plays a key

role in developing and executing the long-term procurement strategy,
ensuring that the organization gets the best value from its purchases
over time.

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Key steps of the purchasing process
Usually, the purchasing process is a cycle, with each phase requiring
information and permissions. Every business will add its special
touches. But in general, the buying process follows a well-known
pattern of steps. They are given below:

Understand business needs



Even though this isn’t exactly a step, it’s an excellent place to start if
you want to manage how a business spends money, find ways to
save money, cut spending that isn’t necessary, and deal with supply
chain problems.

For example, if a company requires a large number of goods, such

as mobiles, there may be an opportunity to negotiate discounts.

Create a purchase requisition




The purchasing process begins when someone makes a purchase

request and sends it in. You can speed up this process and improve
the request process by creating a standard request form. This way,
purchase requests will be the same and meet the data management
needs of your team.

Screen the requests




Screening purchase requests ensure that all of the company’s

purchases are correct, don’t go over budget, and, most importantly,
are actually needed.

Search for suppliers




Once the request has been screened and approved for sourcing, the
purchasing team will look for suppliers or vendors to meet the
request. For this, you need to learn more about strategic sourcing
and its importance for finding the best suppliers.


 Request for proposals



Once the best products have been sourced, it’s common for the
purchasing team to ask for proposals to make sure the products or
services are within budget, can be delivered on time, and meet your
business’s policies or requirements.

Negotiate costs and contract terms




Sometimes, all the boxes may be checked except pricing or payment

terms. For example, the quality might need improvement, but the
supplier might be the only one who can meet the demand by a
certain date. In this case, the purchasing manager will try to negotiate
a more reasonable purchase total.

Approval



The purchase request is prepared for final approval if every step of

the process, including cost, delivery, and payment process, complies
with the specifications. If it’s turned down, the purchasing team will
either inform the requester or try to find another source or vendor.

A department manager’s lack of approval, duplication of the

purchase, high cost, and failure to provide enough value for the
company are a few reasons why it could be rejected.

Issue a purchase order



Once all the approvals are in, the purchasing team will make a
purchase order based on the details of the approved purchase
request and send it to the chosen supplier or vendor to be filled out
for supplier evaluation.

Best practices for the purchasing process

Use the following best practices to make the purchasing process go
smoothly.

Automate the efficient purchasing process




Whenever you can, try to automate the purchasing process, with

purchase automation software, a business can shorten the time it
takes to buy something, make it easier for people to do their jobs,
reduce mistakes, and reduce paperwork.

Purchase automation software is helpful if your business repeatedly

buys a lot from the same suppliers.

Keep accurate records




Keep accurate records of the whole buying process. It includes

records of possible suppliers, negotiations, sales, returns, and any
other transactions. You might want to switch to a different supplier or
have a problem with the one you already have.

Keeping accurate records of every purchase process step helps

reduce problems and extra work in the future.

Review your needs often

 


A company’s needs change all the time. Sometimes, a business

needs something completely new, and sometimes, it needs a
different version of something it already has. Make it a regular part of
your business to look at what you need now and whether the things
you buy meet those needs.

By keeping an eye on your operations regularly, you can find

problems and fix them faster. It lets your business grow while you
make wise spending decisions.

Conclusion
The purchasing process is primarily transactional and systematic. But
you should still use expert strategies to help your company even
more. Using the steps and best practices we’ve shared, your
Purchasing team will achieve savings and efficiency for years to
come.

Now, it’s time to create your purchasing process. You will have to
analyze your market, business, and customers. If you need any help
with the analysis process, QuestionPro is there for you.

QuestionPro CX is a survey software that helps you analyze

your business and manage your customer feedback. Contact us
8 Steps in
right away to talk about how to do I

Purchasing Process | Purchase

Management
Written by Sachin Thorat in Industrial Engineering

8 Steps in Purchasing
Process | Purchase
Management
PROCEDURES OF PURCHASING :
The policy statements are guidelines and they should be
difficult to understand. Lengthy and too many policies have to
be avoided. The purchasing policy provides the guidelines and
direction in the following categories. It defines:

(a) Rules of purchasing

(b) Conduct of purchasing personnel
(c) Social and minority business objectives
(d) Operational issues

Read more :

1. Objectives and Functions of Industrial Purchasing Department

2. Purchasing Management | Definition , Objectives , Policies

The procedure describes the sequence of steps leading to the

completion of an identified specific task. The purchasing
procedure comprises the following steps as indicated in Fig.
purchasing procedure

1. Recognition of the need:

The initiation of procedure starts with the recognition of the

need by the needy section. The demand is lodged with the
purchase department in the prescribed Purchase Requisition
Form forwarded by the authorised person either directly or
through the Stores Department. The purchase requisition
clearly specifies the details, such as, specification of
materials, quality and quantity, suggested supplier, etc.
Generally, the low value sundries and items of common use
are purchased for stock while costlier and special items are
purchased according the production programmes. Generally,
the corporate level executives are authorized signatories to
such demands. Such purchases are approved by the Board of
Directors. The reference of the approval is made on requisition
and a copy of the requisition is sent to the secretary for the
purpose of overall planning and budgeting.

2. The Selection of the supplier:

The process of selection of supplier involves two basic

aspects: searching for all possible sources and short listing
out of the identified sources. The complete information about
the supplier is available from various sources, such as, trade
directories, advertisement in trade journals, direct mailing by
the suppliers, interview with suppliers, salesmen, suggestions
from business associates, visit to trade fair, participation in
industries convention, etc. Identification of more and more
sources helps in selecting better and economical supplier. It
should be noted that the low bidder is not always the best
bidder. When everything except price is equal, the low bidder
will be selected. The important considerations in the selection
are the price, ability to supply the required quantity,
maintenance of quality standards, financial standing etc. It
should be noted that it is not necessary to go for this process
for all types of purchases. For the repetitive orders and for the
purchases of low-value, small lot items, generally the previous
suppliers with good records are preferred.

3. Placing the order:

Once the supplier is selected the next step is to place the

purchase order. Purchase order is a letter sent to the supplier
asking to supply the said material. At least six copies of
purchase order are prepared by the purchase section and each
copy is separately signed by the purchase officer. Out these
copies, one copy each is sent to store-keeper, supplier,
accounts section, inspection department and to the
department placing the requisition and one copy is retained by
the purchase department for record

4. Follow-up of the order:

Follow-up procedure should be employed wherever the costs

and risks resulting from the delayed deliveries of materials are
greater than the cost of follow-up procedure, the follow-up
procedure tries to see that the purchase order is confirmed by
the supplier and the delivery is promised. It is also necessary
to review the outstanding orders at regular intervals and to
communicate with the supplier in case of need. Generally, a
routine urge is made to the supplier by sending a printed post
card or a circular letter asking him to confirm that the delivery
is on the way or will be made as per agreement. In absence of
any reply or unsatisfactory reply, the supplier may be contact
through personal letter, phone, telegram and/or even personal
visit.

5. Receiving and inspection of the materials:

The receiving department receives the materials supplied by

the vendor. The quantity are verified and tallied with the
purchase order. The receipt of the materials is recorded on the
specially designed receiving slips or forms which also specify
the name of the vendor and the purchase order number. It also
records any discrepancy, damaged condition of the
consignment or inferiority of the materials. The purchase
department is informed immediately about the receipt of the
materials. Usually a copy of the receiving slip is sent to the
purchase department.

6. Payment of the invoice:

When the goods are received in satisfactory condition, the

invoice is checked before it is approved for the payment. The
invoice is checked to see that the goods were duly authorised
to purchase, they were properly ordered, they are priced as
per the agreed terms, the quantity and quality confirm to the
order, the calculations are arithmetically correct etc.

7. Maintenance of the records:

Maintenance of the records is an important part and parcel of

the efficient purchase function. In the industrial firms, most of
the purchases are repeat orders and hence the past records
serve as a good guide for the future action. They are very
useful for deciding the timings of the purchases and in
selecting the best source of the supply.

8. Maintenance of vendor relations:

The quantum and frequency of the transactions with the same
key suppliers provide a platform for the purchase department
to establish and maintain good relations with them. Good
relations develop mutual trust and confidence in the course of
the time which is beneficial to both the parties. The efficiency
of the purchase department can be measured by the amount of
the goodwill it has with its suppliers