Best Raw Material Procurement Process for SMEs – OfBusiness

Raw materials are an essential part of most businesses, especially manufacturing businesses. Lack of accurate raw materials can halt day-to-day operations of the manufacturing companies.

It majorly happens in the case of small and medium-sized enterprises as they face financial hurdles. To tackle this challenge, OfBusiness has introduced business loans for raw material procurement.

In most cases, SMEs and start-ups take advance from clients or consult their friends for requirements such as raw material procurement.

However, they fail to get the amount in most of the cases. No longer will small and medium-sized enterprises have to borrow the amount from their near and dear ones. OfBusiness offers collateral-free business loans for the procurement of raw materials.

Let’s understand more about procurement of raw materials and have a look at some of the best raw materials procurement processes for SMEs.

What is Raw Material Procurement?

Often, many of us confuse procurement with purchase. While both are closely related to each other, there are many differences. Purchasing is referred to as obtaining the raw materials for daily operations. However, procurement refers to the overall framework established to optimize the purchase for maximum savings.

The key steps involved in the procurement of raw materials by SMEs are:

1. Need Analysis

In this stage, the company gathers the list of raw materials required from different teams. Then, the procurement team segregates the list based on their priority.

The procurement team also determines the best way to procure raw materials for savings on operations cost. For instance, if the fuel cost is rising, the procurement team identified alternative transportation options.

2. Purchase Requisition

In this stage, the procurement manager cross verifies the list with different teams. The raw materials are approved as per their priority for operations. List of items that are of low importance is re-verified with the team.

3. Purchase Order Review

The senior procurement manager does the final review of the list. The senior manager has the complete authority to cut down the list by considering other teams. Once the approval from the procurement manager is obtained, the list is sent to the accounts department.

4. Funds for Raw Materials are Verified

The accounts department releases the funds based on the list. In the case of small and medium-sized businesses, capital for raw material procurement is limited. In such cases, the accounting department considers management opinion. This is where OfBusiness can help SMEs and start-ups.

OfBusiness offers collateral-free business loans for the procurement of raw materials. And, the good news is that businesses can avail loans up to two crores.

Looking for business loans to procure the raw materials for your organization. Apply for OfBusiness business loan and run your daily operations seamlessly.

5. Contract Negotiation and Approval

The organization contacts the suppliers in their list and takes a quotation. The supplier with the lowest quotation is selected while ensuring the quality of raw materials. Once the quote is approved, the raw materials are transported to the manufacturing units.

6. Shipping of Raw Materials

In some cases, the suppliers arrange for the transportation of raw materials. However, it does not always happen in the case of all suppliers. Majorly, the organization will need to set the transportation to transfer the raw materials from suppliers to the manufacturing units.

7. Invoice approval and payment

Once the goods reach the manufacturing unit, the products are cross-verified against the bill. Upon confirmation, the invoice is approved by the accounts department, and payment is transferred to the suppliers.

While the steps involved in the procurement of raw materials are common for almost all SMEs, the overall budget may vary based on the supplier’s cost. In case you need any help in raw material procurement for your firm, get in touch @ contact@ofbusiness.com.