17. Transaction Execution


Welcome back to our lesson on transaction execution.
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Upon completion of this lesson, learners should be able to Describe the role of procurement Transaction Execution. And discuss the key components of Transaction Execution.
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We now focus our attention to the third core process in the Procurement Process Model. Transaction Execution, which is all about making procurement happen on a day-to-day basis.
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The steps depicted here, from request through payment, are common sense steps that need to take place for the purchase of any good or service. Imagine an organization that processes thousands of procurement requisitions a month, for everything from pencils to airline tickets to elevator parts. Each of these requisitions flow through these steps. An inefficient, slow, paper-based transaction flow may cost the organization on the order of $100 per requisition to process. Think about where these costs may come from. They may be from hidden administrative costs, time spent filling out the paper requisition. Perhaps mailing the requisition. Postage, internal handling, etc. Opening and reviewing the requisition. Manually looking up supplier contracts, existing spend commitments, etc. Converting the manual requisition to a paper order; mailing, faxing, or calling in an order’s requirements to a supplier, all of these are labor intense and slow activities. Manually receiving the shipping goods and comparing the receiving goods to what the paper file says should be received, communicating the receipt, reconciling the discrepancies, etc. And notifying accounts payable via paper documentation. All again slow, labor intense, costly steps that add up to a huge amount of costs. Compare this to an efficient, electronically based transaction flow, that is enabled by electronic catalogs, workflow tools, electronic payments, automatic transaction matching and approvals based upon agreed upon criteria, etc. And this more efficient environment. An end to end transaction costs maybe $10 or less.
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To help convey and understanding of the complexities associated with transaction execution, let’s take a closer look at the steps involved within the procured to pay transaction flow of a company. In this example, an originator has a need to requisition a good and searches through catalogues that may be available to them. Perhaps this takes five minutes or so using an electronic catalogue.
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An electronic requisition is then triggered and flows down one path if it is for a capital fixed asset. And another pat if the requisition is not for a fixed asset.
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Staying on the non fixed asset path, we see that upon requisition approval, a purchase order is created and transmitted to a supplier. The supplier then has a number of steps that take place internally, not noted here. Before the buying organization receives the purchased goods, checks the quantity, quality and matches documentation such as packing slips and purchase orders. Everything may match up fine and an automatic electronically
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checking of contracts, payment terms, purchase orders, etc., takes place where there may be discrepancies that need to be resolved through manual interaction.
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Once payment authorization is made, accounting and finance cue payment in accordance with agreed upon policies. Often times invoices are held for a specific amount of days as part of a cash flow management policy of the corporation.
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In this lesson we learned the role of transaction execution is efficient, error-free conduct of the buying process from requisition creation, through payment to the supplier while obeying established contract terms. And we discussed the key components of Transaction Execution. Thank you for watching, and we’ll see you on the next lesson. [SOUND]

Jim Rohn Sứ mệnh khởi nghiệp