1. Review the functions performed, to include workflow, work performed by the purchasing organization and others performing the ordering and/or the purchasing function.
  2. Determine the existence and extent of written organizational policies and procedures.
  3. Examine and evaluate a sample of purchases that represent the routine and the exception through selected purchase transaction documents and contracts along with applicable backup files, documentation, or records.
  4. Gain an understanding of all the activities relating to purchasing, procurement and contracting.
  5. Evaluate the effectiveness of existing routines.
  6. Considering the needs of all parties, identify feasible alternatives for eliminating, simplifying, or modifying existing routines.
  7. Consider a plan for process improvements.
  8. Review software system requirements. 
  9. Consider recommendation of a Spend Data/Contract Management Collection Software system for evaluation by client.

 Contracts and Purchasing Review and Assessment APPROACH AND METHODOLOGY

 IPSCMI’s Purchasing Review and Assessment will evaluate the Purchasing function on several factors as stated below:

  1. Productivity—relates to the volume of work performed and the number of transactions processed by the department.
  2. Relationships—involves the interaction with and interfunctional dependence upon other departments, internal clients, suppliers, vendors, and contractors.
  3. Response—includes how others perceive the positive or negative actions made by the Purchasing function in handling performance requests and also covers whether the function is seen as proactive or reactive.
  4. Expectancy—is the overall tone or theme with which an organization’s administrative staff and various internal customer departments regard the Purchasing function and includes the value they anticipate its performance to generate.


The Purchasing Review and Assessment will cover the following seven principal areas of investigation, based on our understanding of client’s needs:


1.     Policy and Organization—Organizational status; responsibility for Purchasing; formal and informal policies; the purchasing authorization and approval process; job titles, skill sets, and job descriptions; departmental organizational structure and head count; and interviews. 

2.     Purchasing Department Operation—Purchasing procedures; document filing procedures; supplier relations; qualification and supplier approval processes; departmental forms by type, purpose, and usage; and departmental records and reports.  This will include flowcharting of processes. 

3.     Internal Customer Relations—Visit and interview personnel from a sample of internal customer departments who require Purchasing function support.  Conduct a sample Internal Customer Satisfaction Survey via a questionnaire.  Look for early Purchasing involvement. 

4.     Examination of Sample Selected Purchase Orders and Contracts—Gather samples of selected purchase orders, contracts, and agreements; examine in enough detail to ascertain what was done and why; indicate situations for further evaluation.  The objective of this verification is to provide a sound basis for appraisal of current policies and procedures and to give a foundation for constructive, objective recommendations.  The sample should represent both the routine as well as the exception.  Analyze the use of sales and freight terms. 

5.     Performance and Systems—Review information files; commodity, service, and supplier files; solicitation process and supplier performance; and adequacy of departmental reports as well as their frequency.  Review existing Purchasing system requirements.  Compare competitive bidding and negotiated purchases effectiveness through a “market basket” analysis on selected items.

6.     Legal Aspects Due Diligence—Study and review contracts for due diligence and risk analysis, as pertaining to terms and conditions; solicitation and purchase commitments; confidentiality and non-disclosure; acknowledgements and “battle of the forms”; and internet, EDI, fax, and telephone orders. 

7.     Inbound Freight Control—Define functions and determine performance in mode and carrier selection, routing and P.O. specification; analyze and define INCOTERMS and Loss and Damage claims; verify transportation and receiving procedures; and evaluate potential for improvement in any freight and express contracts.


 Based on the completion of the previous steps, develop a list of action items needed to increase purchasing efficiency and effectiveness.

  1. Adequacy of Written Policies and Procedures and Internal Controls
  2. Appropriateness of Purchasing and contracting Management and Organizational structures
  3. Adequacy of Forms, Templates, and Terms and Conditions
  4. Advance Purchasing Planning including Make or Buy/Outsourcing Analysis
  5. Procurement and Sourcing Policies, Procedures, and Techniques
  6. Contract and Supplier Management
  7. Inbound Freight Management
  8. Utilization of Alternate and Streamlined Procurement Approaches
    1.        Alternative Types of Contract
    2.        Alternative Procurement Methods
    3.        Use of eProcurement Tools and Techniques
    4.        Use of Procurement MIS and Technology
  9. Negotiation and Other Cost Savings
  10. Benchmarking to World-Class Systems and Procedures


To learn more, Call us at 1-206-203-4894, Fax: us at 1-415-651-8884, or Email us at admin@ipscmi.org to arrange a free consultation, or visit us at www.ipscmi.org.


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