The procurement process is the sequence of steps a business follows to buy goods and services from outside suppliers: identify the need, source and select a supplier, negotiate, order, receive, pay and review. When orders go out by email, the budget sees the spend only when the invoice lands, and by then the money is owed.
With OneFinOps, the Procurement Agent checks budget, policy and vendor status before an order is placed, the last point spend can still be stopped.
Key takeaways
- Six core steps take a need through to a paid, reviewed supplier.
- Compare suppliers on landed cost and lead time, not unit price.
- Procurement decides what, from whom and on what terms; purchasing places orders.
What are the steps in the procurement process?
- Identify the need and check budget against the cost centre, with quantity, date and reason.
- Raise and approve the purchase requisition under your delegation of authority.
- Source suppliers. Start with the approved vendor list; send an RFQ to at least three suppliers for standard items, an RFP for complex needs.
- Evaluate, negotiate and select on landed cost, lead time, payment terms, quality and past performance.
- Issue the purchase order with HSN or SAC, GST, delivery date and terms.
- Receive, match, pay and review. Stores records a goods receipt note, AP matches invoice, PO and GRN, and the supplier’s performance is reviewed.
As a flow chart, the process has three decision points: is budget approved, is there an approved supplier with a valid rate contract, and are quality and quantity accepted.
What are the types of procurement?
- Direct: raw materials, components and packaging that go into what you sell.
- Indirect: IT, office supplies, facilities, travel. Small and scattered, which is where maverick spending hides.
- Services: contractors, consultants, housekeeping, logistics. TDS often applies, so bring finance in early.
Procurement process example
A Bengaluru software company needs 40 laptops in six weeks. Three resellers quote (pre-GST):
| Criterion | Supplier A | Supplier B | Supplier C |
|---|---|---|---|
| Unit price | ₹68,500 | ₹66,900 | ₹65,800 |
| Landed unit cost, with warranty and delivery | ₹68,500 | ₹69,400 | ₹69,400 |
| Lead time | 2 weeks | 3 weeks | 6 weeks |
The cheapest quote, C, costs the same as B once warranty and freight are added, and cannot deliver in time. A wins and negotiates to ₹67,900, for a PO of ₹27,16,000 before GST.
How OneFinOps handles procurement
The Procurement Agent reads a vendor quotation and drafts the order line by line. It checks the requisition against budget, category policy and preferred vendor status, and routes it to the approver its value and cost centre require. An order above the approval limit goes to the budget holder, and a price above the awarded quote goes to the category buyer, with both figures shown.
Where the first control is the invoice, overspend is found after it is owed. Here the commitment sits against the budget line from the day the order is issued.
See how procurement works in OneFinOps
