What Is Procurement Life Cycle And Why Is It Important?
Looking to improve your organization’s procurement process? Look no further than the procurement life cycle. From identifying a need, to purchasing goods and services, to monitoring and evaluating supplier performance, this essential framework is key to streamlining operations and improving efficiency. In this blog post, we’ll explore what the procurement life cycle entails, why it’s important for businesses of all sizes and industries, and how you can make it work for you. So whether you’re just getting started with procurement or looking to take your processes to the next level, read on!
Procurement Life Cycle
Procurement life cycle is a six-step process that you should follow when acquiring goods and services. It includes pre-purchase planning, acquisition planning, procurement management, post-purchase evaluation, and compliance monitoring.
Pre-Purchase Planning: This step involves identifying the need for the goods or services and understanding customer needs. You should also research potential suppliers to find the best deal.
Acquisition Planning: Next, you will develop a purchase plan with specific requirements and specifications. You should also determine how much you are willing to spend on each item.
Procurement Management: During this step, you will coordinate all aspects of the procurement process from finding the right supplier to ensuring timely delivery. You should also track financial costs and benefits of your purchases.
Post-Purchase Evaluation: After you have made your purchase, it is important to evaluate it to make sure it meets your needs. You should also determine whether any changes need to be made in the purchase plan or procurement strategy.
Compliance Monitoring: Finally, you must monitor your purchasing activity to ensure compliance with regulations and company standards
The 4 Phases of the Procurement Life Cycle
The Procurement Life Cycle is a model that helps businesses understand and manage the different stages of procurement. The four phases are pre-qualification, proposal development, negotiations, and contract award.
Pre-Qualification: Before any procurement process can begin, the company must first pre-qualify potential suppliers. This involves reviewing supplier information and evaluating their qualifications to provide the requested product or service.
Proposal Development: Once the company has pre-qualified potential suppliers, it will need to develop proposals for each one. Proposals are a formal way of asking for something from a supplier, and they should be tailored to meet the specific needs of the company.
Negotiations: After proposals have been developed for all potential suppliers, negotiations will begin. This stage is where companies try to reach agreement on price and other terms of the contract. If negotiations fail, the process can move onto contract award.
Contract Award: Once negotiations have finished, award of contracts can take place. This can be either through a competitive bidding process or via negotiation with the original proposers.
Why is the Procurement Life Cycle Important?
The procurement life cycle is an important part of the buying process for businesses. It refers to the different stages that a product or service goes through from idea to delivery.
There are five main stages in the procurement life cycle: Ideation, Pre-contract negotiations, Contract negotiation, Performance management and Delivery.
Ideation is when a business comes up with an idea for a new product or service. Pre-contract negotiations is when two companies start to negotiate terms of a contract. Contract negotiation is when both companies are trying to figure out what each side wants in the contract and whether they can agree on it. Performance management is when the company measures how well the product or service is working and determines if there are any improvements that need to be made. Delivery is when the product or service actually gets delivered to the customer.
Conclusion
Procurement life cycle is an important concept used in business to describe the various stages that a product or service goes through from proposal, development, production and finally delivery. This process allows businesses to understand the entire procurement process and make better decisions about how best to allocate resources. By understanding how the procurement life cycle works, businesses can avoid common problems and save time and money.