Procurement, as a function, is an inevitable aspect of all business organizations. To operate and aid the expansion and optimization of performance, businesses obtain various goods and services from external suppliers. If organizations aim to harness the power of globalization, they need to work with the best local suppliers at the best possible price. When procurement can help an organization achieve its tactical as well as strategic goals, it is doing it right!

Definition of a Procurement Process
A procurement process is a series of steps that an organization identifies and follows in order to obtain goods or services for their goals and objectives. tweet

Why is the Procurement Process Necessary?
Procurement accounts for spending an organization’s revenue on acquiring goods and services. It has a direct impact on cost savings objective. Zycus’ annual survey of 400+ global procurement leaders, Pulse of Procurement 2018, revealed that 54% of the surveyed professionals recognized cost savings as procurement’s key focus area. Furthermore, 65% of large organizations, 66% of mid-sized organizations, and 55% of small organizations were mandated to manage to spend from an enterprise-level and for that, an effective procurement system was the only solution to reap higher profits.

Apart from achieving cost savings objectives, an effective procurement process helps an organization enhancing supplier performance, compliance, risk management, contract utilization, and sourcing cycle time. tweet

Why is a Periodic Assessment of Procurement Process Necessary?
By periodically assessing supplier performance with regards to fulfilling an organization’s sourcing requirements, a procurement process helps identify the strengths and weaknesses of the suppliers onboard and further ideates and innovates strategies for performance improvement. An effective procurement process also enables organizations to build long-term relationships with their suppliers. Hence, by focusing on supplier relationship management, the synergies created between the two parties resulting in high propositions that provide maximum value for both the supplier and the buyer.

A well-implemented procurement process enables an organization higher visibility into stakeholder performance. Greater transparency helps organizations enforce higher compliance in terms of costs, quality of goods/services, etc. tweet

How can Procurement Process Help?
Given today’s scenario of global political and economic instability, changing trade laws, etc., enforcing a well-defined procurement system can help organizations manage their supply chain and associated risks. By managing risks such as financial risk, operational risk, contract risks, etc., a procurement process prevents supply chain disruptions that concern profitability.

An effective procurement process ensures higher process efficiency at every stage of a procurement cycle in an organization, which in turn shortens sourcing cycle times.

Procurement is more than just purchasing goods and services for an organization. An effective procurement process involves in-depth understanding of requirements by all business units, identifying the right supplier for meeting those requirements, periodically evaluating supplier performance, and negotiating contracts that can provide the highest value at minimum cost. tweet

7 Steps of an Effective Procurement Process
After establishing the importance of the procurement process, the next step is to design the process. Here are the seven steps to effective procurement process-

Step 1: Identify the requirement for goods and services from all business units
The procurement cycle starts when any of the business units in an organization needs obtaining goods/services from an external supplier. Hence, the first step of the procurement process entails identifying and consolidating the requirements of all business units in an organization. Thi