Procurement 101: The Procurement Process Flow

For many companies, procurement can be a complicated and time-consuming process. While the process of efficiently procuring goods or services can appear complex and tedious, it doesn’t have to slow down how you conduct your business. By understanding how an organization shops for solutions, who needs to be involved, and where complications can occur, you’ll be able to greatly improve your procurement process.

The procurement process flow is the framework used to outline how your organization procures goods and services. This framework involves defining who needs to be involved and what steps each involved party needs to take to move the process forward. Understanding this process flow can help improve business practices and develop a hierarchy for purchasing and approving.

While some company’s processes may vary, here is a general procurement flow for businesses to follow:

  1. The buyer submits a request for purchase. How this request is submitted depends on your organization’s own procurement process. It may be handwritten, over the phone, via email, or through a catalog management tool like smartOCI.
  2. A manager approves the request for purchase and a purchase order is created. The person who approves purchases may vary depending on departments or other considerations, but they are usually the first potential bottleneck in the purchase flow. This manager or other designated person may have a large number of requests to work through or may have other responsibilities that hold up the approval process. Other times, they hold off on approving smaller orders until they can group multiple requests together and save on shipping expenses or through volume discounts—something that can be organized from right in Vroozi’s procurement platform.
  3. The accounting department approves the budget request. After the purchase order is created, it is usually up to the buyer to submit a budget request to the accounting department. The accounting department will verify that the funds exist to cover the approved amount for the transaction.
  4. The buyer sends out requests for quotations (RFQ) to potential suppliers. Once the buyer receives approval from accounting, they can start shopping around for the best deal. This is usually for new products or services that the company hasn’t purchased in the past or doesn’t have a preferred supplier to lean on for them. Sometimes, if a past order gets lost or forgotten or another department makes the same order, the buyer will sent out an RFQ when they don’t have to do so. Keeping track of order history across the entire organization can help prevent unnecessarily repeating this step.
  5. Buyer reaches a deal with a supplier and the order is fulfilled. Once the transaction is confirmed, the invoice and payment go back through the accounting department to complete the process. Methods of payment and of crediting the purchase to different departments will vary depending on your company and your suppliers.

Once again, this is the basic framework of how procurement is achieved. Understanding how this process works for your own business can help you to identify who or what is causing any bottleneck in your process flow—and where improvements can be made.

By employing a catalog management tool, like smartOCI, or a procurement platform, like Vroozi, the entire procurement process—from identifying suppliers, to standardizing requests and purchases, to removing bottlenecks—can be streamlined and improved.  Vroozi and smartOCI make it simple to build a catalog of products and services and manage how your organization submits requests, approvals, and makes business purchases.

Now that you’ve defined the process flow, are you ready to optimize your procurement?