How to establish the ideal purchasing process
The purchase order, fundamental in supply chain management, formalizes a commercial proposal to a supplier. Therefore, it is necessary to establish an efficient process to create it, optimizing time and resources within the department.
As this is a daily activity for the buyer, placing a purchase order becomes an almost automatic process, which can result in unnecessary errors and rework, wasting precious time that could be invested in other activities. To help you review this process, we have listed the main points below.
Steps prior to purchase order
Review the quote request
Review the internal quote requisition to verify what needs to be purchased, the priority level of that requisition, and the quantity of product that should be purchased.
It is also important to establish how much of the budget you can have to meet this demand, as well as the possible suppliers with whom you will quote. This will facilitate the supplier selection process.
To avoid misunderstandings, the buyer must clearly and explicitly communicate its intentions to the suppliers. In the case of the purchaser of MRO industrial parts — maintenance, replacement and operations — it is essential that information such as part number, manufacturer, specifications of the complementary parts and quantity of parts, be part of the quotation request.
By doing this, rework and changes in values and deadlines are avoided, as the supplier will know exactly what is being requested.
In addition to data referring to the product, it is essential to include data such as the requisition number; name, address and means of contact and the place where the products must be delivered; doing so, there can be an efficient management of this order by the suppliers, since an error in this information could cause great inconvenience, as it would result in higher costs logistics and delivery time.
Choosing the supplier
Now is the time to review the quotes received and weigh the pros and cons of each supplier. In addition to analyzing the prices and conditions that each company proposed.
At this point, you need to list your priorities for each quote request to make the best choice. If your demand is urgent, for example, delivery time is a crucial factor, and in this case, you might consider paying a little extra for air freight, for example.
In addition, it must be verified that the technical specifications of the products are the same as those contained in the quotation request. Also note secondary specifications, such as the conditions the product will arrive in, assembled or disassembled, shipping, and Incoterm, so that there may be ways to compare providers.
Another factor to be analyzed is the payment terms that each supplier offers. Some offer the option of installments with down payment, others may offer a discount for payment at the time of order, and so on.
It’s now time to formalize your requisition. Set up a detailed purchase order that is faithful to the request for a quote sent earlier.
Put all pertinent information and more than one way to contact us, for urgent cases. It is important to review the entire order and verify all information before sending it to the supplier.
Also check the Incoterm chosen for the order, it has the function of making clear the allocation of risks, costs, and obligations of the logistic process.
Despite some similarities between the purchase order and the supplier contract, the two documents are different, especially with regard to their legal nature. As the purchase order has no legal value, it does not replace the contract, so it must be done to formalize the terms of the negotiation.
In the case of purchasing spare parts and indirect materials, this process is facilitated, as there are General Purchasing Conditions, valid for all orders and functioning as a standard contract between buyer and supplier. This happens to avoid a contract being made for each order, as the need to purchase these parts is recurrent.
Once that’s done, the process is momentarily out of your hands. Take this time to keep track of your inventory up to date and check what items are next to be purchased. Also keep track of your budget to avoid unnecessary expenses.
Steps after sending the purchase order
Delivery, invoicing and supplier payment
After all the necessary checks at the time the cargo enters the factory or warehouse, the department responsible for payment must receive the invoice, the receipt report and the acceptance from the requesting area. With the information at hand, the invoice will be approved and paid.
Be sure to evaluate the provider’s service to understand if it’s worth establishing a long-term relationship with it.
Soluparts: a global trading company
You can also leave the task of comparing quotes and choosing the best suppliers with a company that specializes in all types of industrial materials, such as Soluparts.
We offer quotes from the most relevant manufacturers in the world — read this article about our differentials and find out how we can optimize the day-to-day of your purchasing department.