Step 4: Issuing an Agreement
The fourth step in the purchasing cycle is to issue an agreement. A purchase order or other agreement is created and sent to the supplier. This process and method of transmission could be manual, electronic, or through electronic data interchange (EDI).
The various departments that need a copy of the agreement include:
Other types of agreements include contract and statement of work (SOW) or service level agreement (SLA).
The agreement is issued during the purchasing process regardless if tactical purchasing or strategic sourcing is used.
Step 5: Following Up
Suppliers will be contacted to expedite or de-expedite parts or services, or change orders can be requested regarding quantity or delivery date. Companies might request that the supplier issue an advanced ship notice.
Step 6: Accepting Goods
Close attention must be made when the parts arrive. The receiving department needs to have a copy of the agreement to confirm the correct parts and quantities are received at the correct time and the correct place. Companies might time stamp the bill of lading when the truck arrives particularly if the delivery requested is a date and specific time. A packing slip for each box should be available to identify parts, however each detail should be confirmed before a receiving report is issued. The receiving report can be electronic and notifies the appropriate people and departments.
Step 7: Approving Payment
Accounts payable will verify the purchase order and receiving report match with the invoice from the supplier. Payment terms will also be confirmed as agreed before payment is released. The payment process can be manual or use electronic funds transfer (EFT).