what is the procurement process

What is the procurement process?

Principles of procurement

It's acknowledged that the purchasing of marketable goods is equal to selling half of them already. As a consequence, if the retailer wants to purchase marketable, quality goods, the procurement process should follow certain principles.

Demand-determined

Demand-determined is to determine the purchase of goods based on the demand for goods in the target market. For retail enterprises, the relationship between buying and selling is never to buy good first and sell. The intelligent retailers would instead, find out what the market demand for goods, what goods are easy to sell, before purchasing any goods. Therefore, the first principle is, the purchase entirely decided by the sales situation.

The demand-determined principle can easily explain the relationship between purchase and sales and can promote the production of manufacturers on demand, thus avoiding the blindness. However, when adhering to the principle of demand-determined, different procurement strategies should also adapt to various commodities.

DocShipper Advice: Firstly, for daily necessities, whose sales have been more stable, with smaller external environmental factors interference, retailers can choose the quantities of purchase depending on how much they have been sold. Secondly, for seasonal commodities, retailers should predict before deciding on the purchase amount to prevent overstock. Lastly, for new products, a market demand survey should be conducted a then can be decided about the purchase amount. At the time of sale, enterprises can take appropriate advertising to guide and stimulate customer consumption.

Note DocShipper: In order to fight for customers' and your own benefits, we advise that the quality of goods should be as high as possible to win a good reputation for the enterprises. Quality control plays a rather important role in the procurement process. If your supplier is overseas, try to hire a professional consultancy to control the quality and everything for you. Docshipper might be your best choice.

Channels and procedures of procurement

Channels of procurement

The channels of procurement are the links and routes through which a retailer purchases its goods. Each retailer has its own unique characteristics, so the merchandise sourcing channel may not be exactly the same.

However, in general, the following points should be kept in mind when choosing the channel.
Simplification of the process: Compress the selection process as much as possible to speed up the procurement process. Shortest route principle: In the case of similar commodity prices, choose the nearest products to purchase. Time-saving principle: Reduce transit procedures as much as possible to save time. Economic saving principle: Save procurement cost from all aspects.

There are many types of commodity procurement channels, and here are some of the common ones.
Commercial system wholesalers: for example, commodities such as cigarettes and alcohol are purchased from the tobacco monopoly system and the sugar and alcohol monopoly system. Due to the large number of commodities purchased by retail enterprises, sometimes they have to purchase from several different system organizations.
Production enterprises: direct contact with the manufacturer to purchase goods, can reduce the intermediate process, thus reducing circulation costs, while expanding the source of goods and increase the selectivity of goods.
Wholesale market: a large number of goods are concentrated here, and the advantage is the mass selections and complete varieties; the disadvantage is that the quality is difficult to guarantee.
Distribution center: This is a kind of commodity distribution system that has emerged in China in recent years. Find information about China's distribution center. The distribution center accepts large quantities of commodities from suppliers and then sorts classify, distributes, and delivers them according to the requirements of the merchants. Therefore, the distribution center is actually a place for logistics activities. Retailers can purchase goods directly from distribution centers; however, it is more economical for large-scale retail chains to set up their own distribution centers.

distribution center

Methods of procurement

Retail enterprises should apply the related methods of procurement according to the different characteristics of the purchase channels and sources of various commodities, combined with the actual situation of the enterprise.

Commodity procurement methods mainly include the following types.

Centralized and unified purchasing

The retailer's manager or specialized purchasing department is solely responsible for procurement, and each department should be specialized in filling order forms and selling.

Centralized purchasing has a number of advantages. Firstly, it saves costs by having a small number of staff responsible for whole store purchases. Uniform use of funds makes it also cost savings. Besides, it can prevent the purchase channels from being too scattered and can get the advantage of discounts for bulk purchases. It will help each product department to concentrate on the service of merchandising.

Of course, centralized purchasing has its shortcomings, such as the disconnection between purchasing and sales, unsold goods, an increase of internal transfer procedures, unfavorable internal circulation of goods, etc. Therefore, it is necessary to strengthen the planning of product procurement. Therefore, it is necessary to strengthen the planning of commodity procurement.

The centralized and unified purchase of goods is mainly favorable for small and medium-sized retail enterprises.

Strategies of procurement

For a retailer, if the merchandise sourcing strategy is used properly, it will not only procure quality goods but also ensure the stability of the profitability of the business. Therefore, various merchandise sourcing strategies are introduced here.

Sourcing strategies in a buyer's market
That is, the oversupply of goods in the market, the retailer dominates the situation. At this time, the retailer can rely on the initiative to select goods at will, the main focus on the sale of goods, adhere to the principle of selling into, to demand into, diligent into the fast-marketing procurement, accelerate capital turnover, save procurement costs and improve sales profits.

Purchasing strategy under the seller's market
That is, a situation in which the supply of goods in the market exceeds the demand, the supply of goods is tight, and the supplier is dominant. At this time, the retailer must focus on the commodity procurement process to ensure the stability and adequacy of the supply of goods. Their strategies are mainly.

(1) Open up a wide range of purchasing channels and contact multiple suppliers.

(2) Cooperate with manufacturers and provide them with capital and equipment.

(3) Provide preferential treatment to manufacturers or suppliers, such as subsidized transportation by stores, door-to-door pick-up, advertising assistance, etc.

Sourcing strategies for different life cycle products
There is a life cycle from the development of a product to its selling and weakening, i.e. the trial period, growth period, maturity period, and decline period. When the commodity is in different life stages, the purchase strategy adopted is also different.

(1) Trial period products can be purchased in small quantities, and then decide to purchase in bulk when the market looks good.

(2) The growth period is the best-selling goods, you should actively expand the number of goods, using advertising and promotion.

(3) The mature goods in the early market are still optimistic, can be organized to purchase large quantities of goods; later gradually weakened, replaced by new products, should be planned to gradually eliminate.

(4) Products in the recessionary period should not be stocked, or should be stocked in small quantities according to market demand, and should be replaced by other products in a planned manner so that customers will gradually accept the substitute products and the recessionary period products will be eliminated.

Three basic elements of procurement negotiations

Procurement is not only a major part of a retail store's business, but it is also a business art, and merchandise negotiation is particularly important. The best sourcing negotiation often results in the greatest benefit to the customer and a win-win situation for both the retailer and the supplier.

The core of commodity sourcing negotiations is bargaining, that is, the retail buyers and suppliers negotiate directly on the price of goods and trading conditions.

From the perspective of business interests, there is a difference in the mindset of supply and demand: the supplier wants to be able to supply goods at the usual price (the standard on the quotation), while the retailer wants to obtain high-margin goods at a discounted price.

negotiation

The achievement of the purpose of the procurement of retail stores does require buyers in the negotiation of the continuous learning experience, usually, buyers need to focus on the following aspects of work.

DocShipper Advice: Procurement is never a easy process, in which negotiation plays an important role. If you find in the process of negotiations, these three elements are difficult to follow, try to hire a professional agents as Docshipper to be your full guidance.

Completed procurement process

The procurement process of commodity distribution enterprises can be divided into four stages: preparation, decision-making, supply and demand convergence, and purchase operations.

Ways of procurement

There are many procurement methods, from which the most convenient and advantageous method can be selected, but the procurement method used varies depending on the object of procurement.
We have Open Purchasing, which means make the purchasing publicly. And Normal Purchasing refers to the purchasing behavior that is normalized without speculation. The last way is Scheduled Purchasing, which refers to purchasing actions based on material plans or procurement plans.

If you are not familiar with this industry, don't worry. Here, concerning every phase in the whole procurement process, We have some articles providing the information you may be interested:

💡HOW TO FIND A GOOD PRODUCT TO SELL?

💸 3 FAST OPERATING BUSINESS MODELS 💸

Commodity & Trade Fairs in China [GUIDE 2020]

How to import smartphone from China ? [FULL GUIDE]

Find more information as soon as possible and start your business!

DocShipper Sourcing | Purchase - Quality Control - Logistics

Alibaba, Dhgate, made-in-china ... Many know websites to find suppliers in Asia but how many fall into a scam ?! It is very risky to pay an Asian supplier at the other end of the world based solely on promises! DocShipper offers you complete supply services integrating logistical needs: purchasing, quality control, customization, obtaining licenses, transport, distribution ...

Communication is important, that's why we strive to discuss in the most appropriate way for you!

Write a Comment

Your email address will not be published. Required fields are marked *