What is a Requisition?

In the world of business, procurement, and supply chain management, the term “requisition” is frequently used. But what exactly does it mean? A requisition is a formal request for goods or services, typically initiated by an individual or department within an organization. It serves as the first step in the procurement process, ensuring that the necessary items or services are acquired in a timely and efficient manner. This article will delve into the concept of a requisition, its purpose, types, process, and its importance in organizational operations.

Understanding the Concept of a Requisition

A requisition is essentially a document or form that is used to request the purchase of goods or services. It is an internal document, meaning it is used within an organization and is not shared with external suppliers or vendors. The requisition is usually submitted by an employee or department that needs specific items to perform their duties. Once the requisition is approved, it becomes the basis for generating a purchase order, which is then sent to the supplier.

The requisition process is a critical component of an organization’s procurement and supply chain management. It ensures that all purchases are necessary, authorized, and within budget. By requiring a formal requisition, organizations can maintain control over their spending, avoid unnecessary purchases, and ensure that all procurement activities align with their strategic goals.

Purpose of a Requisition

The primary purpose of a requisition is to initiate the procurement process. However, it serves several other important functions within an organization:

1. Authorization: A requisition ensures that all purchases are authorized by the appropriate personnel. This helps prevent unauthorized spending and ensures that all purchases are necessary for the organization’s operations.
2. Budget Control: Requisitions help organizations control their spending by ensuring that all purchases are within budget. The requisition process typically involves checking the availability of funds before approving the request.
3. Record Keeping: Requisitions serve as a record of all purchase requests within an organization. This documentation is important for auditing purposes and for tracking the organization’s spending over time.
4. Inventory Management: In organizations that maintain inventory, requisitions help manage stock levels by ensuring that items are reordered before they run out. This helps prevent stockouts and ensures that the organization has the necessary items on hand to meet its needs.
5. Vendor Management: Requisitions help organizations manage their relationships with vendors by ensuring that all purchases are made from approved suppliers. This helps maintain consistency in the quality of goods and services and can lead to better pricing through volume discounts.

Types of Requisitions

There are several types of requisitions, each serving a specific purpose within an organization. The most common types include:

1. Purchase Requisition: This is the most common type of requisition and is used to request the purchase of goods or services. It typically includes details such as the item description, quantity, price, and delivery date.
2. Material Requisition: This type of requisition is used in manufacturing or production environments to request raw materials or components needed for production. It is often linked to a bill of materials (BOM) and is used to ensure that the necessary materials are available when needed.
3. Travel Requisition: A travel requisition is used to request approval for business travel. It typically includes details such as the purpose of the trip, destination, travel dates, and estimated costs.
4. Service Requisition: This type of requisition is used to request services, such as maintenance, repairs, or consulting. It typically includes details such as the type of service required, the service provider, and the estimated cost.
5. Capital Requisition: A capital requisition is used to request the purchase of capital assets, such as equipment or machinery. It typically requires a higher level of approval due to the significant cost and long-term impact on the organization.

The Requisition Process

The requisition process typically involves several steps, from the initial request to the final approval. While the exact process may vary depending on the organization, the following are the most common steps:

1. Initiation: The requisition process begins when an employee or department identifies a need for goods or services. The requester completes a requisition form, providing details such as the item description, quantity, price, and delivery date.
2. Submission: Once the requisition form is completed, it is submitted to the appropriate personnel for approval. This may include the requester’s supervisor, department head, or procurement team.
3. Review and Approval: The requisition is reviewed to ensure that it is complete, accurate, and within budget. If the requisition is approved, it is forwarded to the procurement team. If it is not approved, it may be returned to the requester with comments or requests for additional information.
4. Purchase Order Creation: Once the requisition is approved, the procurement team creates a purchase order (PO) based on the information provided in the requisition. The PO is then sent to the supplier to initiate the purchase.
5. Receipt of Goods or Services: When the goods or services are received, they are checked against the PO to ensure that they match the order. Any discrepancies are noted and addressed with the supplier.
6. Invoice Processing: Once the goods or services are received and verified, the supplier submits an invoice to the organization. The invoice is matched against the PO and the requisition to ensure that the charges are accurate.
7. Payment: After the invoice is verified, payment is made to the supplier. The requisition, PO, and invoice are then filed for record-keeping purposes.

Importance of Requisitions in Organizational Operations

Requisitions play a crucial role in the smooth operation of an organization. They provide a structured and controlled process for requesting and acquiring goods and services, ensuring that all purchases are necessary, authorized, and within budget. The importance of requisitions can be summarized as follows:

1. Financial Control: Requisitions help organizations maintain control over their spending by ensuring that all purchases are authorized and within budget. This helps prevent overspending and ensures that financial resources are used effectively.
2. Operational Efficiency: By providing a structured process for requesting and acquiring goods and services, requisitions help organizations operate more efficiently. They ensure that the necessary items are available when needed, reducing downtime and improving productivity.
3. Compliance: Requisitions help organizations comply with internal policies and external regulations. They provide a clear audit trail of all purchase requests, approvals, and transactions, making it easier to demonstrate compliance during audits.
4. Vendor Management: Requisitions help organizations manage their relationships with vendors by ensuring that all purchases are made from approved suppliers. This helps maintain consistency in the quality of goods and services and can lead to better pricing through volume discounts.
5. Inventory Management: In organizations that maintain inventory, requisitions help manage stock levels by ensuring that items are reordered before they run out. This helps prevent stockouts and ensures that the organization has the necessary items on hand to meet its needs.

Challenges in the Requisition Process

While requisitions are an essential part of organizational operations, the requisition process is not without its challenges. Some of the most common challenges include:

1. Delays in Approval: The requisition process can be slowed down if there are delays in obtaining the necessary approvals. This can be particularly problematic if the requested items are needed urgently.
2. Incomplete or Inaccurate Requisitions: Requisitions that are incomplete or contain inaccurate information can lead to delays in the procurement process. This can result in the wrong items being ordered or the items being delivered late.
3. Lack of Communication: Poor communication between the requester, approvers, and procurement team can lead to misunderstandings and delays in the requisition process.
4. Manual Processes: In organizations that rely on manual requisition processes, there is a higher risk of errors, delays, and inefficiencies. Manual processes can also make it more difficult to track and manage requisitions.
5. Budget Constraints: Requisitions may be delayed or denied if there are budget constraints. This can be frustrating for requesters who need the requested items to perform their duties.

Best Practices for Managing Requisitions

To overcome the challenges associated with the requisition process, organizations can adopt several best practices:

1. Automate the Requisition Process: Implementing an automated requisition system can help streamline the process, reduce errors, and improve efficiency. Automated systems can also provide real-time visibility into the status of requisitions, making it easier to track and manage them.
2. Standardize Requisition Forms: Standardizing requisition forms can help ensure that all necessary information is included and that the forms are easy to complete and understand.
3. Provide Training: Providing training to employees on how to complete requisition forms and navigate the requisition process can help reduce errors and improve efficiency.
4. Establish Clear Approval Workflows: Establishing clear approval workflows can help ensure that requisitions are reviewed and approved in a timely manner. This can help prevent delays and ensure that the necessary items are acquired when needed.
5. Monitor and Analyze Requisition Data: Monitoring and analyzing requisition data can help identify trends, bottlenecks, and areas for improvement. This information can be used to optimize the requisition process and improve overall efficiency.

Conclusion

In conclusion, a requisition is a formal request for goods or services that serves as the first step in the procurement process. It is an essential tool for organizations to maintain control over their spending, ensure that all purchases are necessary and authorized, and manage their inventory and vendor relationships. While the requisition process can present challenges, adopting best practices such as automation, standardization, and clear approval workflows can help organizations overcome these challenges and improve the efficiency of their procurement operations. By understanding the concept, purpose, types, and process of requisitions, organizations can better manage their resources and ensure that they have the necessary goods and services to meet their operational needs.