The procurement life cycle refers to the series of stages that organizations follow to find and obtain the goods. It helps us to organize our raw materials, machinery, goods, and technology services, companies are dependent on their goods, so they need an efficient procurement life cycle plan so that they can grow their business exponentially. In this blog, we will learn about the procurement life cycle in detail.
Table of Contents:
What is the Procurement Life Cycle?
The procurement life cycle refers to the process that contains all the steps included in finding the goods and services to run the business. It includes all the steps from identifying the need to manage supply chain management to deliver successful products and services. It is very important to manage the procurement life cycle because it is essential to make sure the products are cost-effective, and of better quality goods are delivered.
Steps in the Procurement Life Cycle
Here are the steps involved in the procurement life cycle:
1. Identify business requirements
The first step is to identify the business requirements of the organization like: goods, services, or works, and accordingly plan the other steps of the procurement process. This step makes the foundation of this complete procurement process.
2. Consider a list of suppliers
When we are done with the business requirements, we will next move to find the list of suppliers that can fulfill the business requirements. In this process, we should do proper market research to find out the best suppliers who can fulfill our business needs successfully.
3. Negotiate contract terms with selected suppliers
The third step is to negotiate some contract terms like Goods price, delivery deadline, payment, etc. with the suppliers to provide a better solution to our customers to increase the profit of the organization.
4. Finalize the purchase order
When we are done with the negotiation, we will move to the purchase section, Here we will deal with the purchase order of the selected product that includes product information like: Product ID, name, quantity, delivery date, etc.
5. Receive invoice and process payment
When the supplier delivers the goods or products, we must have an invoice receipt of the product details. Before paying the amount, we should check the invoice and the product details in depth, they must be aligned with each other.
6. Delivery and audit
After processing the payment, we must verify the products we got are exactly the same that we ordered. We have to do a proper audit of the products to make sure the received products are correct or not.
7. Maintain accurate invoices for future audits
After ensuring the delivery, we should take records of invoices, purchase orders, and delivery documents for future needs. So that if we want those products in future, we can get the products through that particular supplier easily.
To learn more about Supply chain management and Procurement, Please refer:
Common Challenges in the Procurement Life Cycle
Here are some of the challenges that might occur in the Procurement life cycle:
- It might be difficult to manage supply risks like: price changes, delivery issues, etc.
- Sometimes, it may be difficult to make the suppliers agree on our policies.
- Onboarding new suppliers is also challenging for the organization.
- It might be difficult to manage the orders from different suppliers’ locations.
Conclusion
In conclusion, the Procurement life cycle is a process that includes various steps to manage goods, services, and work of an organization, so far in this article, we have learned the procurement life cycle, its steps, challenges, etc.
If you want to learn more about supply chain management, you may refer to our supply chain management course.