The Purchase requisition process
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The Purchase request process is one of the first steps in the procurement process providing the mechanism for an individual to start the purchasing process which in summary typically includes identifying a need, providing appropriate information describing the requirement and following a work-flow approval system to obtain approval to spend money.
The requisition process varies from company to company. For some, you might need to raise a requisition for each thing you want to buy. Some organizations might use “delegated authority” allowing employees to make purchases up to a certain value without the need for a requisition (these are often procured using tools such as purchasing cards (corporate credit cards). A purchase requisition is then required where you want to spend above that limit.
For the purchase request there is a range of initial information that is required to be captured this will typically include:
- What the need is, i.e. a part number or a description
- How much is needed – usually identified by a quantity
- Unit of measure – for example you might want to order black sticky tape, you might want 10 with the unit of measure being a meter reel. (see how important the unit of measure becomes in this instance?).
- Required by date – when do you need your requirement
- Unit price/budget – How much you’re willing to pay for what you need.
- Supplier if known
Depending on your system you might capture some details about the end user. Note this might be yourself, a colleague, your department, a project, a customer.
Depending on whether you raise the requirement on your MRP system or through another mechanism you might be limited using pre-approved part numbers (from your MRP’s item master).
Purchase requisition approval
One of the key reasons for submitting a purchase requisition is to enable an approval process to take place (i.e. you can’t purchase this item until someone in authority has approved the spend).
Depending on the value of spend and in some cases the types of assets being procured there might be several approval steps that need to be made (i.e. department manager, general manager, director for example).
The time approval takes can vary and is usually dependent on the number of levels of authorization required and the complexity of the requirement.
Some supplementary information is often required for high value/high complex items in the form of a business case
Moving to purchase order
Once a requisition has been approved it usually moves into the procurement department where a purchase order can be raised.
New Product Introduction projects (NPI), got to love them right? If you’ve worked in or around Supply Chain then chances are you will (or have) come across the introduction of new products and witnessed first hand the effect it can have on the supply chain.
Such projects are usually complex and fraught. However, there are lessons that can be learned and fed back into the project management system to improve things next time.
Here is our list of top 10 failures within NPI. Hopefully, you’ll both get a chuckle and a few lessons learned from our list.
1/ Manufacturing issues are not fed back to Engineering team to improve/fix design definition
2/ Pricing pressure. Supplier under-estimates what products will actually cost and tries to re-negotiate mid-project.
3/ Schedule fails to account for complexity, supplier fails and gets the blame.
4/ The right metrics to measure performance aren’t used! (or worse still none at all)
5/ NPI is seen as execution only and not managed as a cross-functional project.
6/ Supplier is new and onboarding hasn’t been executed correctly and supplier is unable to interface correctly with the purchasing organization and unaware of all its obligations.
7/ Specialist tooling required for product launch is found inadequate during production
8/ Lead time estimates prove incorrect
9/ Project team lack experience of NPI
10/ Make/Buy planning, in hindsight, proves incorrect
So, that’s our top 10 list. Have you worked NPI? Any lessons you want to share, we’d love to hear them, use our comments section below to spill the beans!