1 00:00:00,000 --> 00:00:00,960 In this lesson, 2 00:00:00,960 --> 00:00:04,230 we're going to cover the topic of acquisition and procurement. 3 00:00:04,230 --> 00:00:06,000 Now, acquisition and procurement are terms 4 00:00:06,000 --> 00:00:07,680 that are often used interchangeably, 5 00:00:07,680 --> 00:00:09,720 but they do have a distinctly different meaning 6 00:00:09,720 --> 00:00:11,460 that you really need to understand. 7 00:00:11,460 --> 00:00:13,230 Now, acquisition is simply the process 8 00:00:13,230 --> 00:00:15,120 of obtaining goods and services. 9 00:00:15,120 --> 00:00:16,770 By procurement on the other hand, 10 00:00:16,770 --> 00:00:18,240 we're talking about things that are referring to 11 00:00:18,240 --> 00:00:19,980 the entire process of sourcing 12 00:00:19,980 --> 00:00:21,750 and obtaining those goods and services, 13 00:00:21,750 --> 00:00:23,640 including all the processes that lead up 14 00:00:23,640 --> 00:00:25,500 to the actual acquisition. 15 00:00:25,500 --> 00:00:26,760 So let's pretend that you're working 16 00:00:26,760 --> 00:00:28,530 for a multinational corporation 17 00:00:28,530 --> 00:00:29,850 and your department needs to purchase 18 00:00:29,850 --> 00:00:31,800 a new piece of software to better manage 19 00:00:31,800 --> 00:00:33,690 its interactions with your clients. 20 00:00:33,690 --> 00:00:35,100 Now, you can't just go online 21 00:00:35,100 --> 00:00:36,210 and buy the software you want, 22 00:00:36,210 --> 00:00:37,980 even if you have a company credit card 23 00:00:37,980 --> 00:00:39,900 because most large organizations are going to have 24 00:00:39,900 --> 00:00:42,330 a structured process in place to be able to ensure 25 00:00:42,330 --> 00:00:43,890 the right decisions are being made, 26 00:00:43,890 --> 00:00:45,510 that your budgets are being adhered to, 27 00:00:45,510 --> 00:00:47,940 and that your overall security isn't going to be compromised 28 00:00:47,940 --> 00:00:50,010 when you install that piece of software. 29 00:00:50,010 --> 00:00:53,040 So to conduct the acquisition and procurement process, 30 00:00:53,040 --> 00:00:54,900 we first need to understand the different types 31 00:00:54,900 --> 00:00:57,810 of purchase options that an organization might utilize, 32 00:00:57,810 --> 00:01:00,600 including a company credit card, an individual purchase, 33 00:01:00,600 --> 00:01:02,790 or the use of a purchase order. 34 00:01:02,790 --> 00:01:04,830 Now, many organizations allow their employees 35 00:01:04,830 --> 00:01:07,350 to use a company credit card to make minor purchases 36 00:01:07,350 --> 00:01:09,330 on behalf of the organization. 37 00:01:09,330 --> 00:01:12,060 These purchases are generally good for low cost items 38 00:01:12,060 --> 00:01:13,890 that must be purchased very quickly. 39 00:01:13,890 --> 00:01:16,110 For example, if you need more ink or toner 40 00:01:16,110 --> 00:01:18,570 or paper for your printers, using a company credit card 41 00:01:18,570 --> 00:01:20,430 would be a great option for that. 42 00:01:20,430 --> 00:01:22,860 Now, each company is going to set their own transaction limits 43 00:01:22,860 --> 00:01:24,180 and specify the type of items 44 00:01:24,180 --> 00:01:26,940 that could be purchased using that company credit card. 45 00:01:26,940 --> 00:01:28,800 For example, here at Dion Training, 46 00:01:28,800 --> 00:01:31,290 there's only a few of us who have a company credit card. 47 00:01:31,290 --> 00:01:33,270 And depending on our role in the company, 48 00:01:33,270 --> 00:01:35,400 we have different limits that each employee can use 49 00:01:35,400 --> 00:01:36,690 when they're making a purchase 50 00:01:36,690 --> 00:01:38,430 and how much money they can spend 51 00:01:38,430 --> 00:01:39,300 without having to go through 52 00:01:39,300 --> 00:01:41,250 a different procurement process. 53 00:01:41,250 --> 00:01:43,710 Next, we have an individual purchase option. 54 00:01:43,710 --> 00:01:45,870 Now, an individual purchase is commonly used 55 00:01:45,870 --> 00:01:48,900 in organizations when an individual will purchase something 56 00:01:48,900 --> 00:01:50,670 and that person is the employee, 57 00:01:50,670 --> 00:01:52,770 making that purchase on behalf of the company, 58 00:01:52,770 --> 00:01:54,450 and then they go and seek reimbursement 59 00:01:54,450 --> 00:01:56,160 for the purchase they made. 60 00:01:56,160 --> 00:01:57,690 Now, this option is sometimes used 61 00:01:57,690 --> 00:02:00,240 when the employee doesn't have their own company credit card 62 00:02:00,240 --> 00:02:01,680 but they still need to make a purchase 63 00:02:01,680 --> 00:02:03,300 of a small item pretty quickly, 64 00:02:03,300 --> 00:02:05,220 or if the organization finds itself 65 00:02:05,220 --> 00:02:07,200 in an emergency situation. 66 00:02:07,200 --> 00:02:09,060 Often this will be done when an employee 67 00:02:09,060 --> 00:02:11,280 is asked to do travel on behalf of the company, 68 00:02:11,280 --> 00:02:13,320 but has not been issued a travel credit card 69 00:02:13,320 --> 00:02:14,370 for that purpose. 70 00:02:14,370 --> 00:02:16,230 So they'll use their own credit card, 71 00:02:16,230 --> 00:02:17,550 they'll make their purchases for things 72 00:02:17,550 --> 00:02:19,710 like flights and hotels and rental cars 73 00:02:19,710 --> 00:02:21,780 and gas and food and things like that. 74 00:02:21,780 --> 00:02:22,950 And then at the end of the trip, 75 00:02:22,950 --> 00:02:24,120 they'll bring all the receipts 76 00:02:24,120 --> 00:02:25,440 to their accounting department 77 00:02:25,440 --> 00:02:26,670 and then they'll get a check back 78 00:02:26,670 --> 00:02:28,984 or a direct deposit for the amount they spent. 79 00:02:28,984 --> 00:02:31,110 Now, another example of using this kind 80 00:02:31,110 --> 00:02:33,030 of an individual reimbursement policy 81 00:02:33,030 --> 00:02:34,500 is when an organization doesn't have 82 00:02:34,500 --> 00:02:36,360 its own company credit card yet. 83 00:02:36,360 --> 00:02:38,520 For example, I recently started a new company 84 00:02:38,520 --> 00:02:39,570 and we don't have a credit card 85 00:02:39,570 --> 00:02:41,880 for that company yet because it's so new. 86 00:02:41,880 --> 00:02:44,760 And so when I made new purchases for that company 87 00:02:44,760 --> 00:02:46,470 I was using my personal credit card, 88 00:02:46,470 --> 00:02:48,480 and then I was reimbursed from the company 89 00:02:48,480 --> 00:02:50,100 for those purchases. 90 00:02:50,100 --> 00:02:52,470 Now, in this case, that company actually wrote me a check 91 00:02:52,470 --> 00:02:53,730 and then I put that in my bank account 92 00:02:53,730 --> 00:02:55,110 to pay off my credit card bill. 93 00:02:55,110 --> 00:02:56,520 But again, this is what we're talking about 94 00:02:56,520 --> 00:02:58,320 when we talk about an individual purchase. 95 00:02:58,320 --> 00:03:00,210 It's when an individual, like an employee 96 00:03:00,210 --> 00:03:02,250 makes the purchase and then they're reimbursed 97 00:03:02,250 --> 00:03:04,260 for that purchase by the company. 98 00:03:04,260 --> 00:03:06,270 Now, the final option we have for purchasing 99 00:03:06,270 --> 00:03:08,190 is the use of a purchase order. 100 00:03:08,190 --> 00:03:09,090 Now, if you're going to buy something 101 00:03:09,090 --> 00:03:10,860 that's larger or more expensive, 102 00:03:10,860 --> 00:03:13,680 your company may require the use of a purchase order 103 00:03:13,680 --> 00:03:16,440 and this is usually referred to simply as a PO. 104 00:03:16,440 --> 00:03:19,320 Now, a purchase order or a PO is simply a formal document 105 00:03:19,320 --> 00:03:21,300 that's issued by the purchasing department 106 00:03:21,300 --> 00:03:23,520 that authorizes a specific purchase. 107 00:03:23,520 --> 00:03:25,110 For example, at Dion Training, 108 00:03:25,110 --> 00:03:26,700 we work with a lot of large companies 109 00:03:26,700 --> 00:03:28,890 who are buying training for 25 or 50 110 00:03:28,890 --> 00:03:31,230 or 500 employees at one time. 111 00:03:31,230 --> 00:03:32,280 And in those cases, 112 00:03:32,280 --> 00:03:34,320 they usually will issue us a purchase order 113 00:03:34,320 --> 00:03:36,360 that is signed by their financial department, 114 00:03:36,360 --> 00:03:39,090 and they provide that to us as their form of payment. 115 00:03:39,090 --> 00:03:40,470 Now, that purchase order itself 116 00:03:40,470 --> 00:03:41,850 isn't actually a payment though. 117 00:03:41,850 --> 00:03:43,050 It's just a promise that says 118 00:03:43,050 --> 00:03:45,000 they're financially obligated to pay us 119 00:03:45,000 --> 00:03:46,830 for the amount of that purchase order. 120 00:03:46,830 --> 00:03:48,900 And this makes us be able to collect that money 121 00:03:48,900 --> 00:03:51,510 based on the terms of the payment, like net 15, 122 00:03:51,510 --> 00:03:53,190 net 30, or net 60 123 00:03:53,190 --> 00:03:55,170 which indicates how many days they have 124 00:03:55,170 --> 00:03:56,850 to actually send us that physical check 125 00:03:56,850 --> 00:03:58,680 or to send us the money electronically 126 00:03:58,680 --> 00:04:00,510 to cover the amount of that purchase order 127 00:04:00,510 --> 00:04:02,910 within 15, 30, or 60 days 128 00:04:02,910 --> 00:04:04,440 according to the master service agreement 129 00:04:04,440 --> 00:04:07,080 that we have in place with that specific company. 130 00:04:07,080 --> 00:04:08,700 Now, before the purchase can be made, 131 00:04:08,700 --> 00:04:09,780 especially when you're dealing with 132 00:04:09,780 --> 00:04:11,490 hardware or software purchases, 133 00:04:11,490 --> 00:04:12,540 your organization may have 134 00:04:12,540 --> 00:04:14,430 an internal approval process in place 135 00:04:14,430 --> 00:04:15,840 that you have to follow. 136 00:04:15,840 --> 00:04:18,000 The use of this approval process for purchases 137 00:04:18,000 --> 00:04:19,380 is there to ensure that the purchase 138 00:04:19,380 --> 00:04:21,390 aligns with the company's goals and needs, 139 00:04:21,390 --> 00:04:22,800 and that there's enough money in the budget 140 00:04:22,800 --> 00:04:24,420 allocated for that purchase, 141 00:04:24,420 --> 00:04:25,740 as well as making sure the security 142 00:04:25,740 --> 00:04:28,200 and compatibility of that product is going to work 143 00:04:28,200 --> 00:04:30,300 with the company's existing infrastructure, 144 00:04:30,300 --> 00:04:31,890 Once that has all been properly assessed, 145 00:04:31,890 --> 00:04:34,050 we can then authorize that purchase. 146 00:04:34,050 --> 00:04:36,420 For example, I used to work for the United States Navy 147 00:04:36,420 --> 00:04:38,100 and they have a very rigorous process 148 00:04:38,100 --> 00:04:40,110 known as the ITPR process, 149 00:04:40,110 --> 00:04:43,410 or the information technology procurement request process. 150 00:04:43,410 --> 00:04:45,330 Before any hardware software could be purchased 151 00:04:45,330 --> 00:04:46,890 by anyone in the US Navy, 152 00:04:46,890 --> 00:04:49,050 a detailed assessment of the need and benefits 153 00:04:49,050 --> 00:04:51,780 of that software hardware had to be conducted. 154 00:04:51,780 --> 00:04:53,100 Then the product is checked 155 00:04:53,100 --> 00:04:55,170 against the Navy's information technology standards 156 00:04:55,170 --> 00:04:56,880 for security and interoperability 157 00:04:56,880 --> 00:04:58,260 with their current systems. 158 00:04:58,260 --> 00:04:59,093 And then finally, 159 00:04:59,093 --> 00:05:00,900 a review of the organization's budget allocation 160 00:05:00,900 --> 00:05:03,450 and source of funding is also going to be verified. 161 00:05:03,450 --> 00:05:04,770 Once all of that is done 162 00:05:04,770 --> 00:05:07,016 and all the evaluations are successfully conducted 163 00:05:07,016 --> 00:05:09,930 then we can have a formal request that's going to be initiated 164 00:05:09,930 --> 00:05:12,360 that goes all the way up through multiple levels of approval 165 00:05:12,360 --> 00:05:14,550 by the organization's senior decision makers 166 00:05:14,550 --> 00:05:17,070 before we can actually undertake that purchase. 167 00:05:17,070 --> 00:05:18,180 Now, after your organization's 168 00:05:18,180 --> 00:05:20,160 internal approval process is completed, 169 00:05:20,160 --> 00:05:22,350 you can then procure the software or hardware. 170 00:05:22,350 --> 00:05:25,350 At this point, another set of processes is going to begin 171 00:05:25,350 --> 00:05:26,910 that includes assessing the compatibility 172 00:05:26,910 --> 00:05:28,860 of the product with your current systems, 173 00:05:28,860 --> 00:05:30,930 carrying out security checks and configurations, 174 00:05:30,930 --> 00:05:32,820 conducting proper training for your end users 175 00:05:32,820 --> 00:05:34,230 on how to use the new product, 176 00:05:34,230 --> 00:05:35,310 and integrating that product 177 00:05:35,310 --> 00:05:37,830 into your organization's existing workflows. 178 00:05:37,830 --> 00:05:40,320 So remember, acquisition and procurement involves 179 00:05:40,320 --> 00:05:42,240 more than just buying something. 180 00:05:42,240 --> 00:05:44,610 Acquisition and procurement are structured processes 181 00:05:44,610 --> 00:05:46,590 that are designed to ensure the financial prudence, 182 00:05:46,590 --> 00:05:48,900 operational efficiency, and increased levels of security 183 00:05:48,900 --> 00:05:50,730 for your organization's enterprise network 184 00:05:50,730 --> 00:05:52,020 are being achieved. 185 00:05:52,020 --> 00:05:53,490 Whether it's using a company credit card 186 00:05:53,490 --> 00:05:56,220 for an immediate need, seeking individual reimbursement, 187 00:05:56,220 --> 00:05:58,020 or following a stringent approval process 188 00:05:58,020 --> 00:06:00,660 like the United States Navy ITPR process, 189 00:06:00,660 --> 00:06:02,400 acquisition and procurement is all about 190 00:06:02,400 --> 00:06:03,480 making the right decisions 191 00:06:03,480 --> 00:06:05,910 in the best interest of your organization. 192 00:06:05,910 --> 00:06:08,340 Every organization based on its size, nature, 193 00:06:08,340 --> 00:06:10,680 and requirements, will have its own unique acquisition 194 00:06:10,680 --> 00:06:12,150 and procurement processes. 195 00:06:12,150 --> 00:06:13,500 But what remains consistent across 196 00:06:13,500 --> 00:06:15,750 all of them is an emphasis on a structured, 197 00:06:15,750 --> 00:06:17,940 secure, and efficient procurement practice 198 00:06:17,940 --> 00:06:19,490 that you're going to be utilizing.