Procurement Definition is Crucial To Your Business. Learn Why!

Procurement Definition is Crucial To Your Business. Learn Why!
A basic definition of procurement would be ‘the best possible acquisition of goods and/or services at the right time and, price from the right source. Procurement at a complex level can involve locating long-term suppliers, essentially committing one organization to another. 

Procurement most commonly includes buyers making decisions in conditions of scarcity. A method often deployed at this time is a cost-benefit analysis.

Procurement Definition is Crucial To Your Business. Learn Why!

CBA, this process involves weighing up the total expected costs against the total expected benefits in order to choose the best or most profitable outcome. Procurement is often split into two groupings, these being direct and indirect.

Direct procurement is relevant to manufacturing scenarios unique and is also the main focus of supply chain management. This style of procurement takes into account all items that are part of the finished product; therefore it directly influences the manufacturing process. In modern business usually conforms to the following 7 steps:

This is the first step in the process and deals with searching for suppliers who can satisfy your specific requirements.

When one or more suitable suppliers have been located contact is made via a variety of methods including requests for quotations (RFQ) and requests for information (RFI). Alternatively they could be contacted directly.

At this stage references are sought about the products/services of the companies in question.

Negotiations take place over such issues as price, availability and any other key aspects of the deal.

Payment, delivery, and supply of the goods/services as agreed in the contract are undertaken.

There are 3 basic segments of resources needed to keep a business running. The first, of course, is the physical or raw materials. Physical materials include the materials needed to create the product or complete the service, as well as the physical space necessary (such as a lot/building) to perform the job. The second segment is labor or manpower.

Of course, no job can be done, even if the process is machine-centered, without the input of people. People can never be taken out of the equation when considering procurement. And lastly, there is capital. Without the finances, both materials and labor cannot be acquired. Making sure that all 3 types of resources are to be acquired is the job people involved in procurement management is concerned about.

Take for example those that are involved with the acquisition of physical materials. To gather raw materials, one must negotiate-people with possession of those materials. As for labor, there must be people responsible for both recruiting and screening people for specific roles inside the business. And for capital, there must be people responsible that cash is flowing appropriately.

Especially for large companies, procurement should be managed properly at all times. There should be a perfect balance of procurement. Too little procurement results in the delay or even stoppage of production.

Too much procurement would be too costly especially in the financial aspect. Those managing procurement should work in coordination with other departments so all needs are going to be addressed when necessary.

What is procurement? Procurement is a process to purchase desire materials from the market with complete documentation i.e. from purchase requisition format to good received the note.

Departments submitting their monthly or quarterly items requirements to the procurement section to start the procurement process which is initiation of comprehensive purchase requisition form duly signed from finance department and distribute it to different suppliers to seeking the items market quotations and procurement department consolidate all supplier items price in a comparative summary and determine the lowest cost of items with quality maintained.

Finally procurement department issue the purchase order to the select suppliers and received all items and note in the good received note (GRN).

The procurement of goods is subject to the requirements of the project or section. The section provides a list of goods that need to procure for the project. The finance section is responsible to review the requirement according to the budget line and approve it for further process.  The procurement department conducts the quotation process and issued a purchase order to the lowest service providers as per the procurement policy.  Items delivery and inventory is a key task of the procurement department.  I hope this information will give you enough information about the procurement process.  Please share it with your friend’s domain so they will get benefit from it.

Development of Procurement Plan

Procurement planning shall be integrated with applicable budget processes and based on indicative or approved budgets, as appropriate. Section heads of all sections and Project heads shall submit their anticipated annual procurement requirements to the regional Procurement/Administration Managers, who shall consolidate the requirements into a single procurement plan and submits it for review of Finance Manager (for budget availability) and recommendation of the BRANCH MANAGER. After approval of the Regional Procurement Plan from the BRANCH MANAGER, the plan is submitted to the GM/CEO at the end of the first quarter of each fiscal year by the respective regional Procurement/Administration Manager.

A consolidated procurement plan shall be prepared by the GM/CEO within three weeks from the completion of annual budgeting process. The procurement of the plan shall be developed on the basis of inputs received from respective regional branches on a prescribed format which will be consolidated by the GM/CEO as per the specified timelines.

The consolidated annual procurement plan shall be submitted by the Branch Manager to the GM for review and authorization. The approved procurement plan shall be communicated to the respective regional branches for its execution.

Contents of the Procurement Plan
The annual procurement plan shall be developed in a prescribed format (Form-VII). However, if deemed necessary, the GM/CEO may instruct to prepare quarterly procurement plans. Procurement Plan shall contain the following items:

A quarter wise breakdown of the goods, services, works and consultancies to be procured during a financial year (applicable if annual procurement plan); A tentative schedule for the procurement activities from initiation through to delivery of goods, services, works or completion of consultancy contracts

An identification of the relevant procuring department and office; An estimate of the value of each item of goods works and services required based on the amount budgeted in the grant agreement or in case no breakup available or an item not covered under a grant agreement than an estimate made on the basis of market survey or previous procurements of similar items;

A reference to codes for approved budget and activity with respect to approved work plan, implementation plan or any other governing document of the respective project. An indication of the rules applicable to the procurement, where any procurement is not subject to these guidelines are given in this manual; and an indication of the anticipated procurement method for each procurement requirement, including any need for pre-qualification, and the anticipated time for the complete procurement cycle, taking into account the applicable approval requirements.

Amendments to the Procurement Plan
Procurement/Administration departments, Finance Managers and Branch Managers shall review the procurement plan on quarterly basis, and revise and update the procurement plans, when considered appropriate, after discussing it with the relevant requisitioning department. Revisions are normally due to changes in estimates of time requirements, availability of funds, assumptions about institutional capacity, changing priorities and other factors that require plan adjustments. Some scenarios in which revisions are required, a revised plan may be received from a MANAGER BRANCHES and a satisfactory justification is provided for revision or any new agreement entered into or any changes made to the existing contracts with the donor. GM/CEO, upon review and authorization by the respective MANAGER BRANCHES, if satisfied from the justification and appropriateness of revision shall approve the revision in the procurement plan.

Monitoring of the Procurement Plan
All regional Procurement/Administration managers shall submit a bi-annual report on compliance with procurement plan to the GM/CEO by 15 July and 15 January every year. Any variations from the approved procurement the plan shall be justified with adequate explanation and planned remedial actions to be adopted by the relevant teams to bridge the delays. The revision in the procurement plan shall be approved by the GM/CEO. The procurement plan shall be accordingly approved for updating by the GM/CEO. The revisions shall be circulated to the relevant teams by the GM/CEO.

Approval of the Purchase Requisition
The Form-l after obtaining budgetary status shall be promptly forwarded by the requestor to the relevant MANAGER BRANCHES for approval. The concern BRANCH MANAGER shall review the appropriateness of the requested items and accordingly grant his approval. In case of the budget is not available, a special approval shall be obtained in hard copy form or email by the concern GM/CEO shall review the justification and appropriateness of the special approval and accordingly convey the decision to the relevant BRANCH MANAGER.

Selection of Procurement Method
After approval of the From-1 from concerned authorities, the requestor shall submit it to concerned procurement/administration department. Procuring unit's representative will determine the appropriate procurement method for the procurement of goods, services or works on the basis of criteria laid down in section 5.2 of the Manual. All relevant documentation shall form part of the procurement process. 

Shopping Method
Where shopping method is to be used, following procedures shall be followed for the procurement of goods, services, and works in addition to the "Common Procurement Procedures" specified in of the Manual: The concerned Procurement/Admin Official shall first confirm that the items being requested for procurement are not available from stores or under any existing framework contract or similar arrangement;

The Procurement/Admin Official shall identify a suitable vendor by visiting the market or by contacting an existing vendor who has previously supplied similar items. The Procurement/Admin Official shall convey the requirements, either in written or oral, to the identified vendor, In case the Procurement/Admin official is satisfied that the vendor/supplier meets the requirements and offers the best value for money to procure the goods he/she will place the order and document the basis of the identification and selection of the vendor. Admin the official may request for an advance from accounts section on the basis of approved procurement requisition for shopping.

In many cases, many items so delivered may require an inspection or testing by the requisitioning department/person. In such cases, the admin official shall get the verification report from the requisitioning department and forward it to accounts section for payment along with approved Form-l, duly acknowledged purchase order and the valid invoice of the vendor/supplier.

Emergency Procurement Procedures
The following process shall be followed for emergency procurements (Please also refer Annexure -D for process flow chart): GM ONE TEN declares to participation in any emergency/relief activity/Programme/Project and constitutes an Emergency Procurement Committee

Emergency Procurement Committee shall determine the need and specifications of the relief items or services urgently required along with the timeline specifying the number of items or services required. The Committee may also specify vendors, brands or suppliers for certain items for relief procurement:

The committee may instruct/direct the administration department or may receive quotations directly from any market(s)/vendor(s). All quotations shall be evaluated by the committee for appropriateness of rates and other terms.

I Committee decides to seek quotes, Supplier(s)/contractor(s) can be invited through letters, emails, or phone calls to offer their rates, in the form of quotations, along with the specimen of the items(s) if applicable, on the basis of specifications (and/or brand) and in the light of timelines decided by the Committee Members of the committee may also visit the market and obtain rates and specimens for required items from at least 03 suppliers/contractors. Based on the survey, the Procurement Committee shall make a recommendation for the acceptance of the lowest rate offered by the supplier.

Each quotation will be signed and dated by not less than two (02) members of the Committee
Normally the offer with the lowest rate will be recommended by the Emergency Procurement Committee for acceptance. However, the Committee may recommend an offer with higher rate(s) if specifications or brand offered and/or quality of specimen is far better than those offered by the supplier offering lower rates. Moreover, the very important factor of the timeline shall also be considered before making a recommendation.

The Proceedings and recommendations of Emergency Procurement Committee duly recorded in form of minutes of its meetings will be submitted to the GM for final approval.
On the basis of the approval, the Procurement Function shall issue the Purchase Order to the successful bidder.

Contract Administration Responsibilities
BRANCH MANAGER shall designate a member of staff, or a team of staff, as the contract administrator for each contract. The contract administrator shall be responsible for: monitoring the performance of the contractor, to ensure that all delivery or performance obligations are met or appropriate action was taken by the organization in the event of obligations not being met; ensuring that the contractor submits all required documentation; ensuring that the organization meets all its payment and other obligations on time and in accordance with the contract; ensuring that there is adequate costs, quality and time control, where required; preparing any required contract variations or change orders and obtaining all required approvals before their issue, preparing any required contract modifications and obtaining any required approvals before their issue, managing any handover or acceptance procedures; making recommendations for contract termination, where appropriate; obtaining all required approvals and managing the termination process; ensuring that the contract is complete, prior to closing the contract file, Ensuring that all contract administration records are kept and archived as required; and ensuring that the contractor and the organization act in accordance with the Law these Rules and the contract

Goods Inspection
Items are received at ONE TEN by the Administration Section Admin Manager and any technical member of the concerned section to which the procurement relates nominated by the procurement committee, shall inspect the goods received. Inspections should be completed within a reasonable amount of time. If inspection cannot be done immediately, then the purchase order must provide when the inspection will occur and how it will be accomplished.

While inspecting goods, Admin Manager and the technical member shall: Verify that delivered items conform to specifications mentioned in the purchase order Including the product description, model, and brand and product numbers. ii. Compare the quantity ordered against the quantity shipped or delivered. Inspect for damage or breakage. iv. Check for operability/functionality. V. Confirm instructions regarding special handling or packaging were followed. vi. Verify that the unit of measurement count is correct. vii. Verify that delivery documentation (packing slip, certifications, etc.) is acceptable. viii. Verify that packaging integrity is preserved (no leakages, damages, etc.). ix. Verify that perishable items are in good condition and expiration dates have not been exceeded. If any item/items are not according to specification or are defective, Admin The manager shall intimate the supplier to make replacements. If items are readily different from specification mentioned in the purchase order, Admin Manager and the technical personal shall report that to the procurement committee. At the time of the inspection of the goods, The Admin Assistant should prepare "Goods Inspection Report - Form-V in duplicate. The technical member of the committee and Admin Manager countersign the report. One copy of the report shall be kept by the Admin section and the other shall be forwarded to the finance section. Please refer Form-V for Goods Receipt/Inspection Report for details.
Procurement Definition is Crucial To Your Business. Learn Why! Procurement Definition is Crucial To Your Business. Learn Why! Reviewed by Administrative Info on May 19, 2019 Rating: 5

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