Procurement Process & Methods

8/7/2019 Procurement Process & Methods

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Purchasing Cycle &Purchasing Cycle &

FundamentalsFundamentals


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Functions of Purchasing Dept.Functions of Purchasing Dept.

Locating, Selecting and developing

qualified source of supply.

Processing suppliers request for priceincreases.

Disposal of scrap ,obsolete, and surplus

materials.

Vendor analysis , visits,& vendor rating.


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Identify Need

Choose a Procurement Method

Evaluate Offers

Select Supplier & Specify Terms

Release P.O

Purchasing cycle

Monitor Order Status

Make Payment


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Common Procurement Method

Buying according to Requirement

Scheduled Buying

Forward Buying Contract Buying

Blanket orders

Tender buying


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Common Procurement DocumentsCommon Procurement Documents

Purchase Requisition

Request for Quotation (RFQ)

Request for Bid (RFB)/(IFB) Request for Proposal (RFP)

Request for Information (RFI)

Purchase Order


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Purchase RequisitionPurchase Requisition

A purchase requisition is an authorizationfor a purchasing department to procuregoods or services.

It is originated and approved by thedepartment requiring the goods orservices.

Typically, it contains a description andquantity of the goods or services to bepurchased, a required delivery date


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Request for Quotation (RFQ)Request for Quotation (RFQ)

This is a flexible and expeditious method

for acquiring goods & services.

RFQs are generally used for items oflesser value.

RFQs is used where formal discussions

aren't required with suppliers.

Price is generally the main or only factor

in selecting the supplier.


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Request for Quotation (RFQ)Request for Quotation (RFQ)

Expected Suppliers Response:

Quotes should

completely conform to the RFQ requirement

Include a firm Price.

Include delivery time


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Request for Bid (RFB) or Invitation for Bid(IFB)Request for Bid (RFB) or Invitation for Bid(IFB)

The RFB method is the formal & more systematic

method of acquiring goods & services.

In this method a document issued to prospective

bidders to obtain pricing for a specified quantity of anidentified product or service.

Specification are detailed & negotiation is not allowed

Contract award is based on the lowest price received

from a responsive & responsible bidder.


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Request for Bid (RFB) or Invitation for Bid(IFBRequest for Bid (RFB) or Invitation for Bid(IFB))

A responsible bidder should :

Submit the bid on or before the published date andtime of receipt at the purchase office.

As price is the sole determinant in making an award, the

bidder should do enough research before quoting the

Price.

Note :Request for Bid is Used When Lotsof competition exists.


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Request for Proposal (RFP)Request for Proposal (RFP)

The RFP method is used when importance oftechnical considerations dictates the contractaward.

RFP is issued to prospective supplier requesting a"best solution" based on specifications and a

defined scope of work.

Unlike RFB, in a RFP the requirement is generally

expressed in terms of performance specification &required outcome.

Factors other than price are evaluated .


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Request for Proposal (RFP)Request for Proposal (RFP)

A responsible bidder should :

Prospective supplier is expected toprovide innovative ideas .

As, RFP allows for negotiations in order toobtain the best value, customizedproposals suggesting different approaches

to the same business need, should be putforward at the time of negotiation.


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Request for Information (RFI)Request for Information (RFI)

A RFI is a proposal requested from a potential

seller or a service provider to determine what

products and services are potentially available in

the marketplace to meet a buyer's needs and toknow the capability of a seller in terms of

offerings and strengths of the seller .

RFIs are commonly used on major

procurements, where a requirement could

potentially be met through several alternate

means.


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Request for Information (RFI)Request for Information (RFI)

A responsible Supplier should:

give input into the RFI document based on

current industry practices and marketfactors.

These inputs can help customers in pre-

qualifying vendors and assist in the

development of either an RFQ or RFP.


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P.OP.O

A purchase order (PO) is a commercial documentissued by a buyer to a seller, indicating the type,quantities and agreed prices for products or services theseller will provide to the buyer.

Sending a PO to a supplier constitutes a legal offer tobuy products or services.

POs usually specify terms of payment, incoterms for

liability and freight responsibility required delivery date,and specifications and reference or part numbers of theitems to be purchased, with quantities and prices.


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Procurement Process & Methods

Documents

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