Acquisition is the acquisition by an entity of goods and services. This method is generally called the purchasing cycle in 10 steps (Georghiou, Edler, & Uyarra et. al., 2014). The acquisition sequence follows a particular process that starts with need for recognition until the last stage in which the business obtains the products and services needed. A successful procurement process should ensure that the selling or use of the acquired product can lead to profitability as compared with the purchase price. Below is an example of the procurement cycle:
- Requirement generation
- Specific need
- Supplier option
- Price and terms
- Purchase order
- Record keeping
- Invoice approval and payment
- Receipt and inspection of purchase
An organization must identify its needs and also determine whether the requirements can be obtained from an internal or external source. According to Georghiou, Edler, & Uyarra et. al., (2014), an integrated procurement model starts with need determination. And the procedure for requirement generation is contained in the Federal Strategic Planning System. Among the activities forming part of the Strategic Planning Process is: analyzing transport purpose and need, gathering public comment, and securing funds.
It is necessary to identify if an organization has specific requirements for some products. Goods can be definite due various elements, for instance, color or weight. Some companies may have standards for their specifications while others might lack points of reference. The Federal Acquisition Regulation categorizes procurement into supplies, rent of the real property, research and development, construction and services (US Federal Government, 2003). Each group has specifications for procurement. For example, US Federal Government (2003) defines supply to mean all property but not interest in land or land itself.
The business has to determine where to purchase its needed goods and services. In some industries, there are approved a list of vendors. However, others use a purchase order to search for suppliers or use other sources such sales representatives, magazines and the internet (Hawkins, Gravier, & Berkowitz et. al., 2015). It is advisable that after a seller is identified, the business should create a relationship that will help come up with preferred pricing.
Price and Terms
After the company has identified the sources where to obtain needed products and services, it carries out investigations to determine the supplier that offers best terms and prices. According to Georghiou, Edler, & Uyarra et. al., (2014), procurement funding decision is made when the capital obtainment plan for an asset demonstrates that: the product requested justified mainly by cost- benefit analysis, all costs are agreed on in advance, and the performance goals, cost, and schedule for procurement are noticeably identified.
The purchase order document contains information about the price, terms and conditions, and specifications of the good or service, and any further obligation (US Federal Government, 2003). The document is used to formalize the contract between the buyer and the seller.
This phase involves the assignment of the transfer of purchase order. There are various electronic ways through which the purchase order can be delivered such as email, mail or fax among others (Georghiou, Edler, & Uyarra et. al., 2014). It can also be delivered personally. Public procurement process in America consists of three or four major steps among them is contract formulation.
This stage explains the time frame for product or service delivery. Contained in the expediting phase is the date of payment, date of delivery and work completion (Hawkins, Gravier, & Berkowitz et. al., 2015). It becomes very necessary in the case of delay.
Receipt and Inspection of Purchases
After the supplier has delivered the products, the receiving organization inspects the delivery and then accepts or rejects the goods (US Federal Government, 2003). Acceptance means that the company will then have to pay for the items. Rejection of the materials supplied can be as result of various factors such as when the supplies are damaged, when the quantity distributed is not the amount ordered for, among others.
Invoice Approval and Payment
Before the receiving company makes payment, three documents have to match. These are the purchase order, receiving the document and the invoice (Hawkins, Gravier, & Berkowitz et. al., 2015). In the case of discrepancy, the differences have to be corrected before the payment is made. Agreement of the three documents, therefore, means that the contract between the buyer and the seller was honored and hence payment has to be made.
After the purchase is complete the receiving company must keep proper records. The purchase records are used for future reference.
Functional Units Involved
There are different participants involved in the procurement process including the technical department that carries out technical negotiations develop procurement plan and organize procurement activities (Hawkins, Gravier, & Berkowitz et. al., 2015). Another stakeholder is the finance department that helps in the revision of the budget where necessary and also in invoice approval and payment. Similarly, chief of the procurement service monitors the procurement activities to ensure that the process complies with the rules and regulations. Legal advisor, on the other hand, provides guidelines on the contract and helps in negotiations in the case of breach of the contract (Hawkins, Gravier, & Berkowitz et. al., 2015). Lastly, the IT department guarantees stable information exchange and consistency in financial records.
Factors that Trigger Procurement and the Variations in the Procedures
The need for procurement is triggered by the business need for goods and services. Products may include equipment, raw material, and other finished materials while services can be computer programmers, transportation carriers among others. The users identify the material or service needs and communicate this to purchasing personnel (Hawkins, Gravier, & Berkowitz et. al., 2015). Variations in the procurement process occur in the contract. The discrepancies can be as a result of different situations such as alteration of the timeframe for the delivery of goods and services, fluctuations to the nature of services rendered and the difference in the quality and quantity of goods and services that are ordered for (Hawkins, Gravier, & Berkowitz et. al., 2015). Unexpected events like industrial action involving suppliers also contribute to procurement variation. Therefore, it is necessary that appropriate procedures are laid down to help solve the cases of variation. An example of the process that differs from the one discussed above is the American Federal Government procedure. It has the procurement process made of three to four main phases. These are contracted planning, contract formulation, contract administration, and audit services.
Overall, the procurement process is procedural and occurs in ten different steps. However, the procedure may differ from one organization to another. As discussed above, the ten essential phases include needing identification, specific need, supplier option, purchase order, price and terms, delivery, expediting, receipt and inspection, invoice approval and payment, and record-keeping. In the American Federal Government, the procurement process is made of three to four main phases. These are contracted planning, contract formulation, contract administration, and audit services. A proper procurement process ensures that the goods and services supplied to the receiving company meet the quantity, the quality, and other specifications indicated in the purchase order. Before payment is made, there have to be no discrepancies in the procurement contract between the buyer and the seller.
Georghiou, L., Edler, J., Uyarra, E., & Yeow, J. (2014). Policy instruments for public procurement of innovation: Choice, design and assessment. Technological Forecasting and Social Change, 86, 1-12.
Hawkins, T. G., Gravier, M. J., Berkowitz, D., & Muir, W. A. (2015). Improving services supply management in the defense sector: How the procurement process affects B2B service quality. Journal of Purchasing and Supply Management, 21(2), 81-94.
US Federal Government (2003). US Federal Government procurement: structure, process, and current Issues.