Efficient Purchasing Process – 7 steps to establish

Improve your purchasing processes with a simple, effective strategy tailored to SMEs. Discover the key stages in a successful purchasing process, from identifying requirements to placing orders with suppliers.

We’ll also reveal the keys to boosting your efficiency and profitability through automation.

What is a purchasing process?

A company’s purchasing process is theset of steps leading to the purchase of a good or service from a supplier.

It can be conscious and controlled, or more chaotic and random. However, it is very important to ensure that this process is sufficiently well thought-out and optimized to enable good cost control and guarantee a choice of suppliers who will offer the quality goods and services your company needs.

Controlling purchasing processes is not just a concern for large companies. SMEs, too, need to design and monitor them carefully if they are to remain successful.

Example of a procurement process :

The 7 typical stages of a good purchasing process

1. Define your needs

The starting point of any purchasing process is the definition of a clear and detailed requirement, to avoid misunderstandings. Depending on the complexity of the requirement, you may opt for a simple written description following a standard format. For example, you may opt for

• Nature of need
• Pattern
• Delay
• Budget

In this way, you can ensure that your requirements are clearly understood by all the players involved in the process. For the most complex requirements, you can opt to draw up a complete set of specifications.

2. List suppliers

Once your needs have been clearly defined, you can move on to the supplier listing (or “sourcing”) phase. Draw up a list of service providers or distributors likely to supply the goods or services you need.

You can, of course, use the Internet or catalogs that list suppliers, but word-of-mouth can be reassuring when you’re making your first purchase in a particular field, especially if it’s a large one.

If you regularly make the same types of purchases, it might be a good idea to start building up a database of suppliers you’ve worked with in the past. You’ll be able to simplify this step next time, and take the opportunity to rate these different suppliers according to the quality of their work.

3. Invitation to tender

This step is only justified in the case of large or complex purchases. However, if the requirement is for a simple notepad, you can of course skip this step.

However, this step is crucial if you want to make a purchase that requires an in-depth study of the various offers.

In concrete terms, contact the various suppliers selected in the previous step to obtain bids from them. Once you’ve received these bids, you can compare them with the requirements expressed in step 1.

For this stage to be effective, make sure you clearly express your request to suppliers, and that the level of work you ask them to do in responding to your request is well-balanced. You need to ask for sufficiently detailed answers to be able to compare them with your requirements, but without going overboard so as not to discourage certain suppliers, some of whom may be very much in demand. If your need is very complex and requires very detailed answers, don’ t hesitate to divide this stage into several phases.

4. Select suppliers

In this stage, also known as the “short list”, you eliminate a number of suppliers from your initial list. Some suppliers may have declined your request in the previous stage, but for the others, you need to match them to your initial requirement to ensure that their offer is a good match.

Sometimes, certain suppliers surprise you with an offer that is slightly out of sync with your requirements, but which arouses your curiosity. Don’t hesitate to keep an eye on one of these suppliers from time to time, to keep an eye on other ways of working and solving your problems.

If you have CSR (Corporate Social Responsibility) criteria, for example on your suppliers’ carbon footprint, think about analyzing them too.

Ideally, you will have only 2 or 3 suppliers at the end of this stage.

5. Negotiate

You’re almost there! You’ve got a handful of people who are willing to work with you and who seem to fit your needs. Now it’s time to start negotiating.

Once again, this step only concerns certain types of purchase, and you’re obviously not going to negotiate the price of this notepad!

In all other cases, your objective is to obtain the best possible purchase conditions. Here is a non-exhaustive list of possible negotiating points:

• The price (obviously)
• Delivery time
• Warranty conditions
• Quality level
• Maintenance conditions
• Accessories or additional services

A word of advice: negotiate to your advantage, but avoid putting your supplier in a situation that is difficult for him to maintain, as the quality of his work could suffer and this could damage your future relationship. Aim for a good balance!

6. Select supplier

This is it! You can now choose the supplier you’ll be working with.

Normally, you have all the information you need to make an informed choice. At this stage, don’t hesitate to call on various members of your team to help you reach a decision. This is all the more important if they are the ones who will be interacting with the supplier in the future.

Now that you’ve chosen your supplier, let them know quickly so you can move on. And don’t forget to inform the other candidates that they won’t be selected this time, as they’ve certainly worked hard to get back to you.

7. Contractualize

This is the stage when you officially place your order. Whether you’re signing a simple quotation or a more complex contract, this is when you make a commitment to your supplier.

Depending on the complexity of the operation, you may need to call on the services of your legal department or a lawyer. Make sure that all the elements of the offer and negotiation are included in the contract, and that there are no surprises!

Now your supplier’s service can begin!

Why automate your purchasing process?

If purchasing is an important activity in your company, you could benefit from automating part of it.

There are a number of reasons to consider automation in your purchasing processes:

Purchasing process for recurring purchases

The first reason to automate your purchasing processes concerns small, recurring purchases.

Imagine, for example, that you regularly buy office supplies, coffee or other consumables. It’s important that these small purchases respect the purchasing process you’ve put in place, but they can quickly become time-consuming.

By automating the formalization of requirements and supplier selection via forms, scheduled tasks or automatic events, you can save your teams a great deal of time without jeopardizing the rigorous monitoring and organization of your purchasing activities.

For complex purchases

If you regularly make complex purchases, there’s no room for error. Your purchasing process must be followed to the letter, or risk suffering serious consequences.

On the other hand, a process is a living thing, and it can happen that it doesn’t run in a linear fashion. For example, if no supplier responds to your call for tenders, you’ll have to go back from step 3 to step 2. Etc. In a complex process to which you’ve added many sub-steps, this can become difficult to follow.

Automating this process ensures that it is followed precisely. You can be sure that each step is carried out correctly and validated by the right people. You can also better manage the data involved in the process: need, requestor, supplier selected, budget consumed, etc. Thanks to the automatic capture of this data, you benefit from an overview that enables you to better manage your purchasing activities.

To connect the purchasing process to the accounting process

There are many opportunities for collaboration between purchasing and accounting/finance departments. The interconnection between these processes provides a real-time and forward-looking view of the company’s economic situation.

How do you automate a purchasing process?

Phase 1 – Mastering the process and understanding different needs

Before starting to automate, it’s important to fully understand the existing operation and the needs of the various players involved in the process.

To achieve this, we advise you to carry out what is known as a “process audit”.
However, this audit requires a specific method.
To make your work easier, we’ve written an article to guide you through the practicalities of carrying out this diagnosis: Process audit – which method to use?

Phase 2 – Finding the right automation solutions

Phase 3 – Sustaining your improvement with a process sheet

Balancing automation and human intervention in the purchasing process

While automating your purchasing process can save you a lot of time, money and peace of mind, in most cases human intervention remains crucial.

A well-automated purchasing process is one that lets humans take over whenever necessary. Automation captures data, performs low-value tasks and calls on the right people at the right time.

With the right mix of automated and human tasks, you’re ready for a high-performance purchasing process, whatever the size of your business.

Now you know all about purchasing processes. Now it’s your turn! See you soon for more content!