The term 'purchasing' describes every transactional process related to acquiring goods or services. It also includes the process of payment of invoices. The purchasing process usually starts only after the potential buyer has identified or defined the requirement and it ends after receipt of the good or service and payment of invoices.
Every business must purchase goods and services from third-party vendors to meet its production needs. But this purchasing cannot happen arbitrarily and needs to be conducted through a streamlined process — the purchasing process. The purchasing process is the entire system of operations from source to pay . This means all the steps, from placing an order to paying the vendor for that order, are included in the purchasing process.
Organizations that want to ensure the best utilization of their resources must have a detailed purchasing process so that materials/services can be procured in the least time with minimal expenditure.
The procurement team must record all the items needed. This means calculating requirements for each product category and requirements from each vendor in that category.
The next step is to decide on the number of materials that need to be purchased. Cost considerations for wholesale purchase, shelf-life of products, and storage costs all need to be considered, and specific orders need to be created for different vendors.
This step involves communicating with the vendor to clarify if they have all the materials needed in stock. Price negotiations, delivery timelines, etc., must be completed at this stage.
In this step, the higher management must sign off the order, so that the procurement team can begin working with the vendors to fulfill the order.
The final step of the procurement process is to pay the vendors for their orders. The pre-negotiated price will be paid according to the contract signed with that specific vendor.