The ultimate guide to the foreign trade procurement process

By justchinait
October 27, 2020

Purchasing process:

collecting information, inquiring, comparing, negotiating, evaluating, requesting samples, deciding, requisitioning, ordering, coordinating and communicating, expediting, receiving goods, and sorting out payments.

The purchasing process and related document name: receiving purchase plan-inquiry and negotiation-decision-next PO-review-follow up-receipt-payment-return. Relevant documents include requisition, purchase, inquiry, purchase order, etc.

Procurement related:

Purchasing refers to a business activity in which an enterprise obtains products or services from the supply market as a corporate resource under certain conditions to ensure the enterprise’s normal development of production and business activities.

Procurement practice can be divided into two parts: strategic procurement (sourcing) and daily procurement (procurement).

Strategic procurement is the basis for benchmarking comparison by the procurement staff (commodity manager) in accordance with the business strategy needs of the company to formulate and execute the plan for the procurement of the company’s material acquisition, through internal customer demand analysis, external supply market, competitor, supply basis, etc. Set the long-term and short-term procurement goals for materials, the procurement strategies and action plans required to achieve the goals, and find suitable supply resources through the implementation of actions to meet the company’s comprehensive indicators in terms of cost, quality, time, and technology.

The content of the strategic procurement plan includes what kind of procurement technology to use, what kind of suppliers to deal with, what kind of relationship to establish, how to cultivate and develop a group of suppliers that contribute to the company’s competitive advantage, how to execute daily procurement and how to establish contracts, etc.

Daily purchasing means that the buyer sends demand information to the supplier in the form of a purchase order according to the determined supply agreement and terms, as well as the company’s material demand time plan, and arranges and tracks the entire logistics process to ensure that the materials arrive at the company on time. To support the normal operation of the enterprise.

Purchasing objects are divided into direct materials (BOM materials) and indirect materials (MRO materials). Direct materials will be used to form all or part of the products or services provided by the purchasing enterprise to its customers. Direct materials will be produced and operated within the enterprise Used and consumed in activities.

Purchasing is a process by which a commercial organism seeks to ingest from outside the body in order to maintain its normal operation.

The basic principles of procurement Cost-effectiveness principle Quality principle Schedule coordination principle Fair competition principle

What is procurement:

refers to the purchase behavior of obtaining materials and services through exchange and obtaining resources of the right Quality and quantity for the business operation at the right time, place, and price.

Purchaser’s necessary skills:

cost awareness and value analysis ability, predictive ability, expression ability, good interpersonal communication and coordination ability, professional knowledge

What is a good buyer:

In addition to the necessary abilities, the buyer must have a reasonable purchasing plan, abide by the 5R principle, select the appropriate supplier, and add to the management to continuously improve. Without affecting the normal production of enterprises, reduce procurement costs.

Responsibilities of purchasers:

purchase plan and demand confirmation, supplier selection and management, purchase quantity control, purchase quality control, purchase price control, delivery date control, purchase cost control, purchase contract management, purchase record management.

Purchasing process:

collecting information, inquiring, comparing, negotiating, evaluating, requesting samples, deciding, requisitioning, ordering, coordinating and communicating, expediting, receiving goods, and sorting out payments.

Purchase quantity calculation:

the quantity to be purchased in the current period = the amount required for production in the current period + the scheduled inventory at the end of the current period-the estimated inventory in the previous period-the quantity that has been purchased and has not been stored

How to reasonably reduce procurement costs:

Make a reasonable procurement plan in advance, check the current market conditions, and grasp the factors and events that affect the cost. In the event, find the quotations of multiple qualified manufacturers, make a reserve price or budget, and use bargaining techniques. Afterward, choose a manufacturer with an appropriate price to sign a contract, and use quantity or cash discounts.

Purchase price composition:

the level of supplier cost, specifications and Quality, the relationship between supply and demand of purchased materials, production season and purchase timing, delivery terms, and payment terms.

The cost composition of the purchased goods: engineering or manufacturing methods, special tools, and equipment required, direct and indirect material costs, direct and indirect labor costs, manufacturing costs or outsourcing costs, marketing expenses and taxes, and profits.

What is the appropriate price:

The purchase price should be based on the highest goal of reaching the appropriate price. The purchaser must analyze the Quality of the materials and price changes according to the purchase requirements, according to the market conditions, and select high-quality and inexpensive materials for purchase.

How to judge whether the purchase price is reasonable: Cost analysis, price analysis, market research, and multiple manufacturers’ quotations.

How to find suppliers:

Check out our historical articles:

Supplier classification: raw material suppliers, small service suppliers, temporary suppliers.

Qualified supplier standards: excellent business leaders, high-quality managers, stable employee groups, good machinery and equipment, good technology, and good management systems.

How to analyze suppliers: price, quality, service, location, inventory policy, flexibility.

Professional knowledge. Judgment. Responsibility. Time concept. Eloquence.

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