This week post is for the Purchasing/Procurement process and the jobs carried out by the Purchasing department. Purchasing department has a vital role to achieve a balance between three crucial factors: Cost, Quality and Time and they need to carefully prioritize them depending on the procurement goal working at all three organizational levels to achieve suitable trade-offs between the factors.
Cost is impacted by economies of scale, Time by Contracts taking place on Plant level and Vendor selection has crucial impact on Quality of ordered material.
A general procurement process, its impact on other processes and all the documents created can be summarized as follows:
- When Inventory recognizes the need to procure materials because of low inventory, it sends a purchase requisition document to Purchasing department.
- Purchasing department contacts its vendors and requests for their quotation. After receiving the quotation, purchasing department prioritizes the trade-off factors and sends the purchase order to suitable vendor.
- When Inventory receives the ordered materials with goods receipt, invoice verification is done using purchase order and order invoice.
- After verification, material document is created for received materials, which is sent to Accounting department who makes the payment and creates financial document.
Fig:Procurement to Payment Process (Reference :http://www.ramco.com/resources/business-processes/procure-to-pay.aspx)