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When referring to a purchase requisition, the flow of events that a department needs to make a purchase will come to mind. Although some teams have chosen to skip over this step and proceed directly to the purchase order, purchase requisitions are crucial to a well-running purchasing function since they help departments understand what they can purchase and when, taking some of the burden off procurement.
Unfortunately, as complexity would have it, the traditional process of completing a purchase requisition opens the door for workarounds and maverick spending. For this reason, many teams have found that a guided approach can ensure purchase requisitions comply with previously negotiated contracts, adhering to a budgeting process and guaranteeing teams are on track to meet their yearly savings goals.
With other benefits, such as efficiency and a simpler user experience, it is no secret that leading organizations are all adopting a guided model. Leaving the question for many, how do I start? The answer is understanding the process as teams experience it, not just what is documented on paper.
Steps Involved in the Purchase Requisition Process
The traditional process follows three main steps leading up to purchase order creation. In this process, the first step begins with a department identifying a requirement and a member of their team filling out a requisition form with information including a detailed description of:
- the product
- unit of measurement
- quantity
- the suppliers
- technical drawings or specifications
- reference prices
- estimated budget
- pictures (in some cases)
In contrast for services, an employee is required to include details such as:
- a scope of work (SoW) with milestones
- necessary materials or equipment to complete the task
- estimated budget
Completing the Form
Although the process listed above is the reality documented on paper, keep in mind that completing the form may be long without a template. Even if there is a template, employees may find it too complicated to gather the information and complete it properly if it is done on paper. Moreover, teams may request an item that is not with a preapproved supplier, the leading cause of off-contract spending.
Internal Approvals
Once completed, the second step of the process is getting the form through an internal approval round. It is at this step that the team's immediate managers/supervisors must review the purchase requisition and approve its terms. Much like the step above, approvals may be the cause of a bottleneck if teams don't understand who needs to make the approval or if key details are missing and teams must go back and make additions.
Purchasing Department Approval
After this initial approval round, purchase requisitions will go through the final review step through the purchasing department. If it is approved, a purchase order is created. However, if it is rejected (often for missing information), the document will be returned to the requesting team for changes. It is worth noting, if there are any “free text” or “ad hoc” additions, approval time may be lengthier for the time-constrained team, thereby delaying the purchase from occurring.
Although creating a purchase requisition can be distilled into these steps, keep in mind that lots of room exists for one-off purchases to be made, making non-compliance and maverick spending more rampant. Therefore, to ensure your team remains on track toward your saving goals, employees must be guided through a process that is compliant. Here's how.
Creating the Requisition
Since the purchase requisition is what kicks off the entire purchasing process, leading companies will guide their employees with an up-to-date template, often which exists in digital format. Often, these templates are integrated with a team's ERP system and material/services master.
For Selecting the Right Material
Since the purchase requisition is just one part of a larger purchasing process, the guided process often starts with launching one application in a larger vendor portal. Once the application is open, teams will be guided through a step-by-step process, where the answer to some of the earlier fields will influence what later fields will appear. For example, some fields may disappear depending on the context or content input.
When it comes time to select the product, one of the first items in the document, employees will be directed straight to the company’s prequalified suppliers from the vendor master in a drop-down format. Making the selection will then come down to the click of a button. From there, a guided purchase requisition process will steer users toward the right part of a punch-out catalogue. As a result, the easiest process for employees to select their materials is to go through prenegotiated rates, abiding by the team’s saving goals as outlined.
For Picking the Right Service
On the services side, teams will face a similar experience. The employee will launch an application, prompting them to select the right service supplier from a vendor master of prequalified suppliers. After selecting, employees can choose the right service and rate from the services master.
Since the processes are simplified in both cases, it is easier for employees to comply than to seek workarounds.
Simplifying Approvals
The remaining two steps in the purchase requisition process look at approvals. By guiding users through a digital template, approvers will have a simplified process since they don't have to spend the time to decipher ad hoc or free text requests. Even better, some systems have been automated, so that when an approved supplier and an item at an approved price have been selected, no human approver is needed. In these cases, a team member is only engaged in the event of an exception. The result is a reduced approval time.
In tandem with giving approvers an easier document to approve, some companies have found that using a mobile application has further helped teams by ensuring the right person receives the document (no back and forth emailing or search). Secondly, the approver is only required to select approve or disprove from their phone or tablet (a benefit, especially when approvers are higher-up managers that spend most of their day in meetings).
Bringing Everything Together
With all purchase requisitions occurring in the same place (an ERP system rather than a team member’s inbox), compliance is further maintained since all team members have the full context of each order and a trail of documents to refer to if things go wrong.
Deploying a Solution That Works
To help purchasing organizations create their own guided purchase requisition process, the ConvergentIS team has created an easy-to-use Fiori application as a part of a larger Operational Procurement Portal.
See if it lines up with your strategy, download the Build Your Own Business Case Workbook.
