What is a Procurement Cycle?
The procurement cycle is a series of steps involved in the process of acquiring goods for sale or use by a company or agency. It starts with identifying the need for a given product, moves through the process of purchase and delivery, and winds up at renewal, where people decide if they need more of the product. Often, an entire department oversees this process. This department must find the best products at the best prices, considering limitations like refusing to do business with certain companies or countries in the process of deciding what to procure and from where.
When a company identifies the need for a product, the procurement cycle starts, with collecting information. People research available options for meeting the need and collect data about pricing, discounts, delivery times, and other matters. Once they identify the best possible source, they approach the supplier to enter into contract negotiations. This can be as simple as ordering a few cases of paper from a paper mill, or as complex as negotiating for a completely new computer system for a government agency.
During this part of the procurement cycle, people on both sides work to obtain the best deal. The supplier will consider factors like the size of the order and probability of repeat orders, while the company thinks about issues like how quickly it needs the product. It may request samples to give it a chance to assess quality and compare offers from different suppliers. Eventually, it will finalize a deal with a sales contract, and await delivery.
After delivery, people use or sell the product, bringing the procurement cycle to a close as they face either a new need for the product, or completion of a project and no further need for a given product. They can discard unused product, return rentals, get rid of damaged and used-up products, and decide whether they need to order more. At this point in the procurement cycle, people may ask for feedback from employees and others on how well the product met their needs, to decide if they want to use the same supplier or turn to someone new.
There are usually specific procurement procedures in place at a company. People must follow these if they want to order new products, from filing the correct requisition form to making sure that someone is available to sign for the product at time of delivery. This can be complicated in workplaces with issues like security concerns, where protecting the security of the workplace may require some additional steps, like running background checks on suppliers, during the procurement cycle.
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