Procurement is the acquisition of goods, services or works from an outside external source. It is favorable that the goods, services or works are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location. Corporations and public bodies often define processes intended to promote fair and open competition for their business while minimizing exposure to fraud and collusion.
These stages may vary in different organizations, depending on whether purchasing is sourcing a new or repetitively purchased item, and also whether there is a detailed approval process for purchases that exceed a specific amount. New items require that purchasing spend much more time up front evaluating potential sources. Repeat items usually have approved sources already available. The Exhibit illustrates a typical purchasing process used in many enterprises with some typical contingency elements shown. This diagram also shows how supplier evaluation and selection involves the purchase of new items or services, or during a review of existing purchase contracts.
A document flow accompanies the movement of orders and material throughput the purchasing process. Historically, preparing and managing the proper purchasing documents has been a time-consuming process. Most firms have streamlined the document flow process to reduce the paperwork and handling required for each purchase. The suite of tools used to achieve efficiency in purchasing transactions is broadly defined as “e-procurement”. Companies are using e-procurement tools to manage the flow of documents by (1) automating the document generation process and (2) electronically transmitting purchase documents to suppliers. The benefits of electronically generating and transmitting purchasing-related documents include