Procurement Process in 5 Ideal Steps: The Ultimate Template (2023)

The procurement process should be something that all procurement managers be aware of. If you don’t or you are here to improve it, then don’t worry; you are definitely in the right place.

For this article, we will be tackling the entirety of the procurement process. We’ll walk you through the definition of the process, the actual process itself, how we simplified it for your efficiency. Also, we added various examples of the procurement process that you can discuss and share.

By the end of this article, you should have an idea of what a procurement process is, how you’ll be using it, and how to improve your own process.

To give you an overview, this article will discuss the following:

  • Identifying The Procurement Process
  • The Procurement Process Simplified
  • Market Research
  • Request For Information (RFI)
  • Request For Quotation (RFQ)
  • Negotiation Phase
  • Contracting Phase
  • procurement Process Examples

Identifyingthe Procurement Process

As procurement managers, we already know what procurement means.

It is simply the act of buying and negotiating for materials needed by you or your office. The word “procurement” itself comes from the word “to procure” or “to get”. Sounds simple enough, right?

Therefore, the term procurement process means the whole procedure of price discussions, negotiations, market research, and even up until the delivery of the actual goods.

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It is the implementation and identification of steps or processes to ensure that the business can acquire goods and services needed to meet its requirements and achieve its objectives.

You could also look at the procurement process into four simple processes:

  • Decide what you want to buy
  • Locate the goods.
  • Receive the purchased goods.
  • Pay for the goods.

Now it would be good if the whole process itself were just that simple. However, it’s not.

The reality is, the procurement process is more complex than it seems. There are a lot of factors to consider and sources to look at. Not to mention researching the actual price of the goods can also take some time.

Finally, when you’ve managed to find the goods and negotiated a good price for the goods, a procurement manager has to think of the schedule for the delivery.

The Procurement Process Simplified

Try to Google the term “procurement process” and you’ll end up with hundred (or even a thousand) search results.

You see, every expert in the field of negotiations and procurement has their procurement process and they’d very much want you to follow their ways too.

However, all it does is muddle the whole process. Some of the processes are either too complex or too simple that the actual important information needed for each process is forgotten or not discussed.

Thus, the need for a clear, practical, and simplified procurement process is needed. And that is what we are going to aim for with this article.

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Have a look at the image below:

Procurement Process in 5 Ideal Steps: The Ultimate Template (1)

We know that there are a lot of procurement processes out there that offer dozens of steps but we believe that having too many processes will not only confuse you, it will also take you too much time to invest in.

Having a simple yet efficient procurement process will not just save you time and effort, but resources as well. The time saved can be spent on other important tasks, such as sourcing for other suppliers, canvassing for other solutions, and others.

But we’re already getting ahead of ourselves. Here are our 5 easy procurement process steps.

Step 1– Market Research

The assignment to buy goods or services can come from companies, managers or procurement managers themself. More about that in step 2, but before a procurement manager starts procuring supplies, there must first be a need for the said supply. Therefore, it’s the procurement manager’s responsibility to recognize the need for supplies and to develop market research for the said supply.

Market research will help the procurement manager come up with the exact number or amount for the needed supplies.

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For example, an IT company has around 40 people coming in as new hires and there are only 20 computers for use. The procurement manager’s market research must have data and research that will help him/her in making sure he knows everything needed for buying additional computers for their growing company.

Some of the questions that a procurement manager should ask during market research should be the following:

  • Does the company have a current supplier?
  • Does the company have an alternate supplier in case the original supplier is gone?
  • Does the company have an ample budget for procurement?
  • Is there a shortage of the material that the company is trying to procure?
  • If yes, will this affect our company’s budget allocation for the procurement?
  • Is there an alternative if the supply needed is not available?

The market research should also cover sourcing for new available suppliers. Depending on the company or not, sourcing specialists can help the procurement manager in identifying new sources of supplies.

Finally, the market research helps in identifying key information needed for the next steps. Information such as pricing per supply and brand quality is important and should be included in the research.

Click here to know more about Market Research.

Step 2– RFI (Request for Information)

The second step involves asking for information not just from suppliers, but from the heads of the department or branch that need the supplies.

Because before you create a purchasing order, you will need to come up with the exact number of supplies needed. Information such as the number of available supplies and the pricing per supply are just some that you can ask when making the request.

When doing market research, you must ask the following questions:

  • Which department or branch in the company needs the supplies?
  • How many supplies are needed?
  • How long should supplies last? A month? A year?
  • Does the branch already have a reliable supplier?
  • Is there an opportunity to look for new suppliers?
  • How much budget is allocated for the said supply?

This is why market research is the first step of our procurement process since it will help you identify key information about the supplies you need.

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Once the procurement manager has enough data, a purchase request is then sent to higher management for budget approval. This is where company management will then decide how much budget is given to the procurement manager, based on data that was given by the initial market research.

The RFI can be considered a part of the process where you ask for more information from the branch managers, sourcing specialists, and others involved.

Click here to know more about Request For Information (RFI).

Step 3– RFQ (Request for Information)

The request for quotation is the part of the procurement process where you ask suppliers for their initial pricing for the supplies needed. Usually done by letter, the procurement manager sends the request while the supplier responds by giving the initial price for the supplies.

For an idea on what to ask the supplier, here are some questions that one can ask:

  • Does the supplier have a warehouse for the supplies?
  • Where are the supplies located?
  • For materials supplied outside of the country, how long will delivery take?
  • For materials supplied locally, how long will delivery take?
  • How much is the initial price per supply?
  • Is there a shortage of the said supplies right now?

Once a reply from the RFQ or request for quotation is received from the supplier, the procurement manager should hold a meeting to discuss the quotes given. A detailed analysis for each pricing is considered while the initial market research will give the procurement manager an idea of how much each supply is priced at a market level.

The information from the market research, once again, is invaluable because it will give the procurement manager an edge when proceeding towards the next procurement process.

Click here to know more about Request For Quotation (RFQ).

Procurement Process in 5 Ideal Steps: The Ultimate Template (2)

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What are the 5 parts of a procurement? ›

We will give a brief overview of the five rights (or five Rs) of procurement, and the importance of achieving them here as follows:
  • The “Right Quality”: ...
  • The “Right Quantity”: ...
  • The “Right Place”: ...
  • The “Right Time”: ...
  • The “Right Price”:
May 14, 2018

What is an ideal procurement process? ›

An effective procurement process involves in-depth understanding of requirements by all business units, identifying the right supplier for meeting those requirements, periodically evaluating supplier performance, and negotiating contracts that can provide the highest value at minimum cost.

What is step 4 in the 5 step procurement process? ›

Step 4: Evaluation and contract

Once a vendor is selected, the contract negotiation and signing are completed, and the purchase order is then forwarded to the vendor.

What are the 5 main processes of project procurement management? ›

There are 5 steps in the procurement lifecycle:
  • Requirements.
  • Vendor selection.
  • Negotiation and contracting.
  • Service delivery and performance monitoring.
  • Renewal/contract closure.

What are the five tools of strategic procurement? ›

The six things your strategic software and procurement tools should have are:
  • Spend analytics. ...
  • eSourcing. ...
  • Award optimization. ...
  • Contract management. ...
  • eProcurement. ...
  • Collaboration and workflow management. ...
  • Mobile access.

What are the 5 main phases of a project? ›

Developed by the Project Management Institute (PMI), the five phases of project management include conception and initiation, project planning, project execution, performance/monitoring, and project close.

What are the basic procurement steps? ›

9 Steps in the Procurement Process
  • Identify which goods and services the company needs. ...
  • Submit purchase request. ...
  • Assess and select vendors. ...
  • Negotiate price and terms. ...
  • Create a purchase order. ...
  • Receive and inspect the delivered goods. ...
  • Conduct three-way matching. ...
  • Approve the invoice and arrange payment.
Mar 23, 2021

What are the main stages of the procurement cycle? ›

6 Steps to the procurement cycle
  • Identify the business need. ...
  • Create a list of suppliers. ...
  • Select a supplier + negotiate the contract terms. ...
  • Create a purchase order. ...
  • Receive the goods and services. ...
  • Reconcile the paperwork + make a payment.

What are the 5 core principles for strategic sourcing? ›

So, after careful thought, our five principles of sourcing are Coherence, Alignment, Rigour, Openness and Commerciality. In this new paper, we cover the first two principles – Coherence and Alignment. Coherence means applying an end to end logic and consistency to the whole sourcing process.

What are the 7 principles of procurement? ›

7. Principles of Procurement
  • Accountability. ...
  • Competitive Supply. ...
  • Consistency. ...
  • Effectiveness. ...
  • Value for Money. ...
  • Fair-dealing. ...
  • Integration. ...
  • Integrity.

What are the 7 RS in procurement? ›

So, what are the 7 Rs? The Chartered Institute of Logistics & Transport UK (2019) defines them as: Getting the Right product, in the Right quantity, in the Right condition, at the Right place, at the Right time, to the Right customer, at the Right price.

What is procurement process flow? ›

The procurement process flow is the skeletal framework that outlines how purchasing and procurement occurs or is handled within an organization. Generally, the purpose of understanding a procurement process flow is to analyze and improve business practices (in particular, the procurement and purchasing process).

What are the four pillars of procurement? ›

Managing the “4 pillars” of global procurement – people, process, technology, and supply chain – is crucial for ensuring a global approach to standardizing technology infrastructure for the enterprise.

What are the five pillars of procurement and supply chain? ›

The five pillars of supply chain resilience
  • Pillar 1 – Vulnerability. ...
  • Pillar 2 – Management Culture. ...
  • Pillar 3 – Procurement. ...
  • Pillar 4 – Operations. ...
  • Pillar 5 – Demand & Visibility.

What are the 5 stages of SCM? ›

The Top-level of this model has five different processes which are also known as components of Supply Chain Management – Plan, Source, Make, Deliver and Return.


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