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MGMT 4330 Lecture 2 The Purchasing Process

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The Purchasing Process

The purchasing process is the set of activities that a company undertakes to acquire goods and services from suppliers. The process typically includes the following steps:

  1. Identifying needs: The first step in the purchasing process is to identify the goods and services that the company needs to acquire. This can be done through forecasting, demand planning, and inventory management.
  2. Sourcing: Once the company has identified its needs, it must then find suitable suppliers that can provide the goods and services it requires. This can be done through a variety of methods such as internet search, industry directories, trade shows, and supplier databases.
  3. Request for Quotation (RFQ)/ Request for Proposal (RFP): After identifying potential suppliers, the company will send out RFQ/RFP to the suppliers for price quotation or proposal based on the goods and services required.
  4. Evaluation of Suppliers: The company will evaluate the suppliers based on their price, quality, delivery time, and other factors. The company may also conduct on-site visits and request references from the suppliers.
  5. Selection of Suppliers: Once the company has evaluated the suppliers, it will select the most suitable supplier for each good or service.
  6. Purchase Order (PO) Creation: Once the supplier is selected, the company will create a purchase order (PO) that outlines the terms of the transaction, including the price, delivery schedule, and payment terms.
  7. Order Confirmation and Scheduling: The supplier will confirm the purchase order, and schedule the delivery of the goods and services.
  8. Goods Receipt and Inspection: Upon receipt of the goods, the company will inspect the goods to ensure they meet the specifications outlined in the PO.
  9. Payment: Once the goods have been accepted, the company will make payment to the supplier according to the terms outlined in the PO.
  10. Post-Purchase Evaluation: After the purchase is complete, the company will evaluate the supplier’s performance in terms of price, quality, delivery, and service. This information can be used to improve future purchasing decisions.

The purchasing process is a continuous cycle, and the company will repeat these steps as needed to acquire the goods and services it needs to operate. The process may vary by company and industry, and some companies might have more or less steps depending on the complexity of their operations.

Strategic Sourcing and Procurement Blogs

Procurement Quotes

  • “Information is a negotiator’s greatest weapon.” ~Victor Kiam
  • “My father said: You must never try to make all the money that’s in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won’t have many deals.” ~Paul J. Getty
  • “It is not a daily increase, but a daily decrease. Hack away at the inessentials.” ~ Bruce Lee
  • “The fellow who says he’ll meet you halfway usually thinks he’s standing on the dividing line.” ~Orlando A. Battista
  • “If you can’t explain it to a six year old, you don’t understand it yourself.” ~ Albert Einstein
  • “This is a classic negotiation technique. It’s a gentle, soft indication of your disapproval and a great way to keep negotiating. Count to 10. By then, the other person usually will start talking and may very well make a higher offer.” ~Bill Coleman
  • “When the final result is expected to be a compromise, it is often prudent to start from an extreme position.” ~John Maynard Keynes
  • “The best things in life are free.” ~ English Proverb
  • “True negotiation takes place when each side respects the other, and their point of view, and enters into the discussion positively. If you are determined that your solution, and your particular solution only, is the correct one – to be imposed on the other side if necessary – that is not negotiation; it is dictatorship.” ~Tony Buzan
  • “A negotiator should observe everything. You must be part Sherlock Holmes, part Sigmund Freud.” ~Victor Kiam
  • “Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.” ~ Will Rogers
  • “Negotiations are worthless if neither party is willing to budge.” ~Dave Waters

Purchasing Process

Purchasing Process

Stay positive and have a great day.  Hope this blog helped to improve your supply chain knowledge.