Businesses have both income and expenses. One we want to increase and the other we want to decrease. To increase the income and decrease the expenses, procurement solutions could be used. Procurement is a process of getting a product or service from an outside source.
Procurement experts can give you tips about how you can have more profit in your investments. They help you to cut production cost and expenses. They provide insights about the raw materials and purchasing solutions.
Procurement can help you to maintain and use your resources efficiently. There are many things or businesses the company can procure. For example, a company can get a supply of raw material just on time from procurement companies. In this way it would not need to spend anything on storing the raw materials. It will also ensure that the production runs smoothly.
The process of procurement is divided into several steps.
The Procurement Process
The first step is identification of requirements. It is essential to know what exact product or service the company needs. This will help to set the tasks which the procurement company must complete. It will help you to create terms and conditions for the process. It is necessary to create measuring factors to determine the performance of the procurement company.
Next select which type of supplier is most suitable. Research could be done to select a group of suppliers. Their representatives will be called to take part in the tendering process. There are a few eligibility criteria suppliers must fulfill.
After selection, the chosen suppliers are called for tendering. The procurement company which calls for the lowest bid while promising to fulfill all requirements gets the contract. The bidding starts at a base price. The resources you save here can be used in other areas of your business.
Negotiation is made between the companies about various aspects of the product or service.
The tender provider company always reviews the work of the procurement company. The quality and the quantity aspect of the work are inspected. If the provider company thinks that the product or service is not up to the mark then they could reorder the product. They could even change the procurement company serving them.
Next, the process of payment is completed. The tender giver also provides other facilities like relevant training.
Types of procurement
There are two main types of procurement, namely direct procurement and indirect procurement.
Direct procurement is related to the raw materials and goods needed for production. An effective procurement company can help you to get quality raw materials at a low price. It is more of an operational type of procurement.
Indirect procurement focuses on maintenance and repair. They are more tactical based procurement. It helps the company by improving the supporting resources.
Another type of procurement deals with the finished products. It looks after the effective storage and efficient utilization of it.
Procurement solutions are a great option for businesses to increase income and decrease expenses. A reputed procurement company must be appointed as to assure authentic service at an affordable price.
This article was contributed by Myke Thomas, an author who writes about Cost Reduction Companies and related topics.