What Is A Procurement Cycle?
Throughout our lives, we all purchase goods and services for ourselves. First, we identify exactly what we wish to purchase, and then, often subconsciously, consider what is going to deliver the greatest value to us, whether it is cost, or quality, or something else entirely. Once we have done this, we usually compare different suppliers to determine which one offers the best value and, if possible, negotiate a price before making a purchase. Some of these purchases require a contract to be set up with the supplier, for example a mobile phone contract or a car finance contract. We repeat the entire process at the end of the contract. The procurement process is a simple one, despite many people being unaware of it.
A simplified example:
A person wishes to purchase a new car. After doing research, they decide on the make and model of the car they want and the exact specifications they want. Their decision will be influenced by their values and budget.
After researching the garages that have the new car they’re looking for, they will test-drive the car and then make their decision about which one to purchase. There will be a cost consideration, but there may be other factors as well.
Once a garage is chosen, the price is negotiated, and a three-year lease contract is signed. It can happen from time to time that problems arise that need to be resolved, and it is the supplier‘s response to this that we have to manage, which costs us time and money.
At the end of the contract, if the individual wishes to purchase another new car, the process is repeated.
We do the same thing in business. The process is made more complex and time consuming because usually the amounts of money involved are far greater, other stakeholders are involved, and the values criteria used to determine what offers best value are rarely determined by one individual.
It is usually more complicated to negotiate the contracts themselves, and there are no consumer laws protecting the business. The performance of the supplies under contract is crucial to the success of the business and can result in significant financial losses and damage to the company. Therefore, it is imperative for companies to have consistent visibility and control over the entire procurement process, from sourcing to managing contracts and suppliers.
Larger companies have established guidelines for every step of the procurement process that are followed to ensure consistency and save time and money. Over the years, many of these companies have invested in digital procurement solutions to increase their savings, protect their bottom line, and reduce unnecessary risks.
There is one digital procurement solution, oboloo, that is specifically designed for smaller businesses with fewer resources. oboloo is a self-service sourcing platform that provides full visibility and control over all sourcing, contracts, suppliers and savings management. oboloo enables companies to be supplier smart. To learn more please visit www.oboloo.com