When you consider things from a distance, the equipment procurement process might seem basic and straightforward.
Find what you need. Buy the equipment. Receive the shipment. Pay.
However, the growth of the global economy has led to some complexities in this process. Like all business functions, procurement can become complex and incorporate several stages.
Here, you can take a look into the equipment procurement process stages and how they can impact your organization.
Understanding Equipment Procurement
As you already know, equipment procurement is the process of finding and purchasing the tools your company needs to operate effectively. This process aims to reduce your overhead by seeing what you need and working with the equipment you already have in-house.
The equipment procurement process essentially covers the steps that a company will take to get the tools it needs. Typically, this starts from the moment a request for a purchase is made. It eventually involves several steps, which we will highlight in a bit.
Before we begin, you should know that there is no generic format for the equipment procurement process. Usually, the steps you take will vary based on several factors: your company’s size, location, budget, spending power, and structure.
With that said, here are the most critical parts of the equipment procurement process.
Recognize A Need
You do not procure something you do not need. The first stage of the equipment procurement process will be to recognize that you need the equipment in question. A thorough examination of your company and its operation will help with recognizing this need.
Create A Purchase Request
The next step will be to create a purchase request.
These requests are usually made by the departments or workers who need the equipment in question. They eventually get reviewed by your company’s procurement team or procurement manager.
Once it receives the proper ratifications, the request is turned into a purchase order that the company acts on.
Examine And Choose Vendors
Your company will also need to determine where to get the equipment.
Some firms have vendor catalogs. They are essentially, a list of suppliers that the company goes to when it needs specific items. On the other hand, other companies immediately go hunting for vendors when they need an item.
Once you choose a supplier, you will need to establish a relationship with them to understand how they work and whether they have what you need.
This is one of the most critical parts of the equipment procurement process. When you choose a supplier, you need to negotiate the equipment’s price and the purchase terms.
These terms could vary, and they include delivery times, installation services (and costs), and transportation expenses.
Purchase Order Creation
The purchase order is the document that declares your intention to acquire the equipment. It outlines all critical information, including the product’s price and specifications. The document also shows the obligations of every party to the deal.
Once you have ironed out all details with the vendor and you sign the contract and send the purchase order to the vendor, you are ready for the deal to move forward.
Once the vendor accepts the order, you both enter into a legally-binding relationship.
Receive The Equipment
When the equipment gets delivered, you will need to accept and inspect it to see that it is in excellent working condition. If the equipment is not up to the defined standard (perhaps missing a component or damaged in some way), you can reject it.
The Three-way Matching Step
While not everyone does this, it is still recommended. Your procurement team will need to reconcile all documents involved in the equipment procurement process. These are the purchase order, the packaging slips (which you get with the equipment), and the vendor’s invoice.
This step will help to prevent any discrepancies that could end up losing you money.
Once you ascertain that everything is fine on your end, you approve the vendor’s invoice and make the necessary payments.
You will need to maintain the correct records for accounting purposes. This entails saving all documents for completed purchases. In the event of a tax audit, you will be glad you did.
Need Help Starting Your Organization?
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