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1. 10/5/13
The 10 Steps of the Procurement Cycle
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The 10 Steps of the
Procurement Cycle
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by Lea Nathan
Management in any company must understand the art of obtaining products and services.
The procurement cycle follows specific steps for identifying a requirement or need of the
company through the final step of the award of the product or contract. Responsible
management of public and corporate funds is vital when handling this necessary process,
whether in strong or weak economic markets. Following a proven step-by-step technique
will help management successfully achieve its goals.
Step 1: Need Recognition
The business must know it needs a new product, whether from internal or external sources.
The product may be one that needs to be reordered, or it may be a new item for the
company.
Step 2: Specific Need
The right product is critical for the company. Some industries have standards to help
determine specifications. Part numbers help identify these for some businesses. Other
industries have no point of reference. The company may have ordered the product in the
past. If not, then the business must specify the necessary product by using identifiers such
as color or weight.
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Step 3: Source Options
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The business needs to determine where to obtain the product. The company might have an
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approved vendor list. If not, the business will need to search for a supplier using purchase
orders or research a variety of other sources such as magazines, the Internet or sales
representatives. The company will qualify the suppliers to determine the best product for
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the business.
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Step 4: Price and Terms
The business will investigate all relevant information to determine the best price and terms
for the product. This will depend on if the company needs commodities (readily available
products) or specialized materials. Usually the business will look into three suppliers before
it makes a final decision.
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2. 10/5/13
The 10 Steps of the Procurement Cycle
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Step 5: Purchase Order
The purchase order is used to buy materials between a buyer and seller. It specifically
defines the price, specifications and terms and conditions of the product or service and
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any additional obligations.
​
Step 6: Delivery
The purchase order must be delivered, usually by fax, mail, personally, email or other
electronic means. Sometimes the specific delivery method is specified in the purchasing
documents. The recipient then acknowledges receipt of the purchase order. Both parties
keep a copy on file.
Step 7: Expediting
Expedition of the purchase order addresses the timeliness of the service or materials
delivered. It becomes especially important if there are any delays. The issues most often
noted include payment dates, delivery times and work completion.
Step 8: Receipt and Inspection of Purchases
Once the sending company delivers the product, the recipient accepts or rejects the items.
Acceptance of the items obligates the company to pay for them.
Step 9: Invoice Approval and Payment
Three documents must match when an invoice requests payment – the invoice itself, the
receiving document and the original purchase order. The agreement of these documents
provides confirmation from both the receiver and supplier. Any discrepancies must be
resolved before the recipient pays the bill. Usually, payment is made in the form of cash,
check, bank transfers, credit letters or other types of electronic transfers.
Step 10: Record Maintenance
In the case of audits, the company must maintain proper records. These include purchase
records to verify any tax information and purchase orders to confirm warranty information.
Purchase records reference future purchases as well.
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3. 10/5/13
The 10 Steps of the Procurement Cycle
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Meshack Adube · Yaba college of technology
This quit good explanation which can help beginers on the this field. Thanks to the writer and producer on
network.
Reply ·
1 · Like · June 13 at 12:37am
Akidi Fortunate · Procurement Assistant at Kotido District
thank it's extremely valuable.
Reply ·
2 · Like · April 18 at 11:10pm
Azubuike Nwako · Senior Technical Adviser on Child Health at United Nations
Extremely valuable business and management terms
Reply ·
1 · Like · April 16 at 10:56pm
Victor Madu · Lecturer at National Veternary Research Institute, Vom, Plateau.
O boy, how you dey?
Reply · Like · April 18 at 3:29am
Lydia Babinaga · City University London
Found the information extremely useful, looking at procurement from different perspectives.
Reply ·
3 · Like · July 24, 2012 at 4:50am
Julius Francis · Mzumbe University-Morogoro
ts gud
Reply ·
2 · Like · July 22, 2012 at 1:45pm
Geofrey Mpemba · Muccobs
mzee unapiga lr nn??
Reply · Like · July 30, 2012 at 1:12pm
Jayathilake Ratnayake
I'm also happy to get this type short explanations to deliver through my staff. I personally believe this is
the area highly corrupted and it create unnecessary price escalations.
Reply ·
1 · Like · March 20, 2012 at 5:36pm
Faith Afolabi · Works at FAITHVIC MULTIMEDIA STUDIO
This is really interesting.
Reply ·
1 · Like · March 20, 2012 at 11:12am
Maureen Harrington · Compliance Specialist at Shaw Group Inc
Most helpful for the line of work in which I'm involved.
Reply ·
1 · Like · February 7, 2012 at 9:31am
Chantal Williams · Southern University
Maureen, what up ,just checked out my pad and its pretty cool. get yours
http://apps.facebook.com/303070336414213/?mhaamche get it now ends tomorrow .
Reply · Like · February 20, 2012 at 11:20pm
Ysf Adam · ENCG de Settat
Tnx, i appreciate this article, and i want if possible, the steps of e-procumenet, e-sourcins, and finaly the
results and the targets for adhesion in the e-buying.
Reply ·
1 · Like · March 21, 2012 at 3:22am
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