In this lesson,
we're going to cover the topic of acquisition and procurement.
Now, acquisition and procurement are terms
that are often used interchangeably,
but they do have a distinctly different meaning
that you really need to understand.
Now, acquisition is simply the process
of obtaining goods and services.
By procurement on the other hand,
we're talking about things that are referring to
the entire process of sourcing
and obtaining those goods and services,
including all the processes that lead up
to the actual acquisition.
So let's pretend that you're working
for a multinational corporation
and your department needs to purchase
a new piece of software to better manage
its interactions with your clients.
Now, you can't just go online
and buy the software you want,
even if you have a company credit card
because most large organizations are going to have
a structured process in place to be able to ensure
the right decisions are being made,
that your budgets are being adhered to,
and that your overall security isn't going to be compromised
when you install that piece of software.
So to conduct the acquisition and procurement process,
we first need to understand the different types
of purchase options that an organization might utilize,
including a company credit card, an individual purchase,
or the use of a purchase order.
Now, many organizations allow their employees
to use a company credit card to make minor purchases
on behalf of the organization.
These purchases are generally good for low cost items
that must be purchased very quickly.
For example, if you need more ink or toner
or paper for your printers, using a company credit card
would be a great option for that.
Now, each company is going to set their own transaction limits
and specify the type of items
that could be purchased using that company credit card.
For example, here at Dion Training,
there's only a few of us who have a company credit card.
And depending on our role in the company,
we have different limits that each employee can use
when they're making a purchase
and how much money they can spend
without having to go through
a different procurement process.
Next, we have an individual purchase option.
Now, an individual purchase is commonly used
in organizations when an individual will purchase something
and that person is the employee,
making that purchase on behalf of the company,
and then they go and seek reimbursement
for the purchase they made.
Now, this option is sometimes used
when the employee doesn't have their own company credit card
but they still need to make a purchase
of a small item pretty quickly,
or if the organization finds itself
in an emergency situation.
Often this will be done when an employee
is asked to do travel on behalf of the company,
but has not been issued a travel credit card
for that purpose.
So they'll use their own credit card,
they'll make their purchases for things
like flights and hotels and rental cars
and gas and food and things like that.
And then at the end of the trip,
they'll bring all the receipts
to their accounting department
and then they'll get a check back
or a direct deposit for the amount they spent.
Now, another example of using this kind
of an individual reimbursement policy
is when an organization doesn't have
its own company credit card yet.
For example, I recently started a new company
and we don't have a credit card
for that company yet because it's so new.
And so when I made new purchases for that company
I was using my personal credit card,
and then I was reimbursed from the company
for those purchases.
Now, in this case, that company actually wrote me a check
and then I put that in my bank account
to pay off my credit card bill.
But again, this is what we're talking about
when we talk about an individual purchase.
It's when an individual, like an employee
makes the purchase and then they're reimbursed
for that purchase by the company.
Now, the final option we have for purchasing
is the use of a purchase order.
Now, if you're going to buy something
that's larger or more expensive,
your company may require the use of a purchase order
and this is usually referred to simply as a PO.
Now, a purchase order or a PO is simply a formal document
that's issued by the purchasing department
that authorizes a specific purchase.
For example, at Dion Training,
we work with a lot of large companies
who are buying training for 25 or 50
or 500 employees at one time.
And in those cases,
they usually will issue us a purchase order
that is signed by their financial department,
and they provide that to us as their form of payment.
Now, that purchase order itself
isn't actually a payment though.
It's just a promise that says
they're financially obligated to pay us
for the amount of that purchase order.
And this makes us be able to collect that money
based on the terms of the payment, like net 15,
net 30, or net 60
which indicates how many days they have
to actually send us that physical check
or to send us the money electronically
to cover the amount of that purchase order
within 15, 30, or 60 days
according to the master service agreement
that we have in place with that specific company.
Now, before the purchase can be made,
especially when you're dealing with
hardware or software purchases,
your organization may have
an internal approval process in place
that you have to follow.
The use of this approval process for purchases
is there to ensure that the purchase
aligns with the company's goals and needs,
and that there's enough money in the budget
allocated for that purchase,
as well as making sure the security
and compatibility of that product is going to work
with the company's existing infrastructure,
Once that has all been properly assessed,
we can then authorize that purchase.
For example, I used to work for the United States Navy
and they have a very rigorous process
known as the ITPR process,
or the information technology procurement request process.
Before any hardware software could be purchased
by anyone in the US Navy,
a detailed assessment of the need and benefits
of that software hardware had to be conducted.
Then the product is checked
against the Navy's information technology standards
for security and interoperability
with their current systems.
And then finally,
a review of the organization's budget allocation
and source of funding is also going to be verified.
Once all of that is done
and all the evaluations are successfully conducted
then we can have a formal request that's going to be initiated
that goes all the way up through multiple levels of approval
by the organization's senior decision makers
before we can actually undertake that purchase.
Now, after your organization's
internal approval process is completed,
you can then procure the software or hardware.
At this point, another set of processes is going to begin
that includes assessing the compatibility
of the product with your current systems,
carrying out security checks and configurations,
conducting proper training for your end users
on how to use the new product,
and integrating that product
into your organization's existing workflows.
So remember, acquisition and procurement involves
more than just buying something.
Acquisition and procurement are structured processes
that are designed to ensure the financial prudence,
operational efficiency, and increased levels of security
for your organization's enterprise network
are being achieved.
Whether it's using a company credit card
for an immediate need, seeking individual reimbursement,
or following a stringent approval process
like the United States Navy ITPR process,
acquisition and procurement is all about
making the right decisions
in the best interest of your organization.
Every organization based on its size, nature,
and requirements, will have its own unique acquisition
and procurement processes.
But what remains consistent across
all of them is an emphasis on a structured,
secure, and efficient procurement practice
that you're going to be utilizing.