Procurement is an indispensable process in enterprises and especially in manufacturing enterprises, is one of the stages of input preparation, which is decisive to the quality of output products. Let's find out information about Procurement with Giaiphapdonggoi.net!
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1. What is Procurement?
Procurement is the process of purchasing goods or services and usually involves business spending. Procurement is often associated with businesses because companies need to solicit services or purchase goods, often on a relatively large scale.
What is Procurement?
Procurement usually refers to the final act of purchasing but it can also include the overall purchasing process which can be very important for companies leading up to their final purchasing decision. Companies can be on both sides of the purchasing process as either a buyer or a seller although here we will mainly focus on the company's soliciting side.
Business procurement requires preparation, solicitation, and payment processing, often involving several areas of the company.
Purchasing costs can be divided into many different categories, depending on the purchasing needs.
Competitive bidding is often part of most large-scale procurement processes involving multiple contractors.
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The word procurement is used to refer to a purchase for a business and is usually done on a large scale. Procurement involves two companies: the buyer and the seller.
Procurement is typically part of an input to a company that then uses the purchased goods or services to create its own final product. This makes it a very important function of any business. It is vital to the success of the buyer's business to obtain the best quality goods or services at the most competitive prices.
On the surface, purchasing can be a simple process. But it is often highly competitive with care and attention to every step. Activities that procurement entails include:
Supplier selection
Payment Negotiation
Strategy test
Final choice
Contract negotiations
Last purchase
2. How Procurement . Works
How Procurement works
The procurement process can require a significant portion of a company's resources to manage. Procurement budgets typically provide managers with a specific value they can spend to purchase the goods or services they need. The procurement process is often an important part of a company's strategy because the ability to purchase certain materials or services can determine whether the operation is profitable.
In many cases, purchasing processes will be regulated by company standards that are often centralized by controls from the accounts payable department. The procurement process includes the preparation and processing of the demand as well as the final receipt and approval of payment.
Taken as a whole, this can involve purchasing planning, standards, defining specifications, supplier research, selection, financing, price negotiation, and inventory control. warehouse. As a result, many large companies may require support from several different areas of the company for a successful acquisition.
In general, procurement costs will be incorporated into the financial accounting of a business, as purchasing involves the purchase of goods or services for the business' revenue goals.
Purchasing Stages
The actual steps involved in purchasing are as follows:
Define requirements
Identify the specifics of the request
Sourcing
Negotiate and finalize prices and terms
Purchase inquiry and order
Delivery of orders
Hurry up
Provide and test products and services
Payment process
Record keeping and reviews
3. Financial accounting
The purchasing process can be broken down and analyzed from several angles. Companies and industries will have different ways of managing direct and indirect procurement costs. Commodity companies versus service companies, will also have different ways of managing costs.
Direct versus indirect purchasing costs
Direct expenditure refers to anything related to the cost of goods sold and produced, including all items that are part of the finished product. For manufacturing companies, this can range from raw materials to components and parts. For companies dealing in goods, this will include the cost of goods purchased from wholesalers for sale.
For service companies, the main direct cost will be the hourly labor cost of the staff performing the service. Purchasing items related to cost of goods sold directly affects the company's gross profit.
In contrast, indirect procurement involves purchases that are not related to production. These are purchases that a
company uses to facilitate its operations. Indirect procurement can include many types of purchases including office supplies, marketing materials, advertising campaigns, consulting services, and more. Companies will generally have different budgets and processes for managing direct costs compared to indirect costs.
Accounting for purchasing goods versus services
Procurement is part of the costing process for all types of companies, but goods and services companies calculate revenue and costs differently. Thus, accounting for purchased goods will also be different from accounting for purchasing services.
Commodity-focused companies will need to treat purchasing those goods as inventory. These companies attach great importance to supply chain management in this area. Service-based companies provide services as the primary revenue generator, so they don't necessarily rely too heavily on the supply chain for inventory even though they may need to purchase goods. for technology-based services.
In general, the cost of goods sold for many service companies is based on the hourly labor costs of the service staff, so procurement as a direct expense should not be a major factor. However, service-based companies will typically have relatively higher indirect costs because they often treat their own procurement as an indirect cost through marketing.
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