Requirement identification- the organisation will try and identify the requirements and develop the strategies to respond to the market needs or demand which can either be internal or external.
This stage involves:
justification of the requirement through need analysis clarity of issues such as quality, agency, total spend etc.
- Budgeting for the procurement e.g. procurement planning, development for a procurement strategy, outline cost, budget schedule, opportunities for cost reduction
- Supplier sourcing- it involves searching for potential suppliers who can reliably provide the requirement e.g. prequalification of suppliers, benchmarking of the supply base, develop strategies for long-term supplier management. Negotiation and selection of
- suppliers– based on the strategic requirements the shortlisted suppliers may be invited for face to face negotiations e.g. ensuring effective competition, building long-term relationships, building long-term win-win collaborative relationships.
- Drawing and signing of the contract- it takes effect immediately after negotiation is concluded, where the parties are bound by contractual agreements. Agreement on price, how risks will be handled, terms, etc.
- Issue of order and delivery- procurement team issues a requisition.
- Receipt and inspection- issuance of payment to suppliers where goods are checked against the relevant purchase order.
- Contract closure
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