When companies need to buy materials, supplies, or services, they go through a process called purchasing. This process involves seven steps that can be used for tactical purchasing, strategic procurement, or both.
Depending on whether it is tactical purchasing or strategic procurement, additional activities such as supplier selection may be required when purchasing materials, services, or capital goods. Regardless of the purchase, it is important to choose the right suppliers. Sometimes, the supplier selection process can be quick, while in other cases, it may take longer as suppliers need to be qualified. The purchasing cycle involves seven key steps.
Step 1: Receiving and analyzing purchase requisition
Step 2: Selecting suppliers (research, RFQ, analyzing, selecting) also known as sourcing
Step 3: Determining the right price
Step 4: Issuing purchase orders and agreements
Step 5: Following up to ensure delivery dates are met
Step 6: Receiving and accepting goods or services
Step 7: Approving the supplier’s invoice for payment