The Procurement Process is a comprehensive process with the 8R principles (Right Quality-Quantity-Time-Source-Price-Place-Way and Relation), to obtain materials and services for the company's operational needs, effectively and efficiently. This process is carried out by the Procurement Department, in collaboration with other relevant departments.

In principle, the procurement process includes the following main stages:

1. Procurement Planning

a. The stage of identifying the needs of goods and services needed by the company.

b. Planning that is carried out jointly between the Procurement Department and the user department and other related parties (especially Budget and Finance Departments).

c. Planning is usually carried out annually for the following year's procurement, to be revised periodically as needed. Thus, the current year's procurement process refers to the predetermined plan. Although there are always changes, a good company will be able to fulfill the procurement program at least above 90% of the initial plan.

2. Purchasing Requisition or Request

a. Purchasing Requisition or often also referred to as Purchasing Request is a request from employees or systems in the company to the Procurement Department, for the purchase of goods/services needed. This is the very first step of the procurement process.

b. This Purchase Request is adjusted to the existing Procurement Planning by including the necessary data such as:

i. Complete specifications of goods or services

ii. Quantity required and estimated cost

iii. When the goods or services? are needed.

iv. Other information required to make it easier to search for the goods or services.

3. Sourcing

a. It is a process carried out by the Procurement Department to get the best vendor/supplier.

b. The process is carried out with the criteria in accordance with the received Purchase Request.

c. This process includes:

i. Search for supplier/vendor data that will be included in the selection process.

ii. Request For Information (RFI), or Request for proposal (RFP) or Request For Quotation (RFQ) to suppliers/vendors.

iii. Analyze incoming bids based on predetermined criteria

iv. Provide recommendations for the best seller/vendor that will be selected according to the established criteria

v. Negotiating both commercial and work agreements so that a final agreement occurs.

4. Issuance of Purchasing Order/Service Order/Contract

a. The process of issuing documents to vendor/supplier as a work order or contractual relationship after a final agreement is reached in the Sourcing process.

b. This document is an official document between the company and the vendor/supplier. This document contains agreements that have been agreed by both parties, both in terms of quantity, price of goods/services as well as contractual rules.

c. For general purchases or short-term Purchase/Service Orders that are only made for one order, the Purchase/Services Order will be accompanied by general terms and conditions from the company that have been agreed upon by both parties. However, for special or long-term contractual relationship and repeated Purchase Orders/Services, which involve high risk, a working relationship document or often called as a contract, which is more specific, is prepared.

5. Contract Management

a. It is a collaborative management process so that the obligations of both parties can be fulfilled

b. This process involves the user of goods/services, including activities including:

i. Periodic information that must be reported (eg fabrication of goods needed at the seller's/supplier's facility, delivery process and others)

ii. Periodic performance appraisal

iii. Conflict resolution

iv. Contract Closing (Close of Working Relationship)

6. Receiving

a. In general, for material purchases, receipts are made by the warehouse department to be forwarded to users or stored in the inventory system.

b. For the purchase of services, acceptance and implementation arrangements are carried out directly by users.

c. Approval of receipt of materials/services from users or from the warehousing department as an official representative of the company, will be used by the vendor/supplier as a reference for issuing invoice.

7. Payment

a. Done by the Account Payable, Finance Department after obtaining the relevant documents (invoice, receipt of Approval Receipt and a copy of the Purchase Order/Services).

b. Payment is made after the documents are verified. This verification process is called three-way match.

c. Payment is made within the agreed time

8. Contract Closing

a. Is part of the Contract Management process.

b. The process that involves the Purchasing Department, vendor/supplier and user as the final process of the procurement process

c. It is a document stating that the procurement process has been completed by both parties and that there are no claims when the document is signed. In the future, according to the agreed time, if a detrimental evidence to one of the parties is found , it will be resolved according to the rules set out in the contract.

In terms that are generally used, Purchasing only involves the process of Purchasing Requests, Issuance of Purchase Orders/Services, Receipts and Payments. Excluding other processes that are more strategic. Hence, Purchasing is a process that is a subset of Procurement.

Subsequent articles will discuss these processes in more detail.