Using wise procurement techniques is critical to a project’s success. Establishing a procurement management plan will help organizations avoid potential mistakes and missed deadlines. It will also ensure that the products and services needed to complete the project are procured on time. The right tools and processes will save procurement managers time and money.
What is Procurement Management Plan?
A procurement management plan, also known as procurement plan outlines the criteria for a specific project as well as the processes necessary to reach the written agreement. All of it linked to procurement is determined and defined in the plan, including the things to be acquired, contracts, cost assessment, and decision criteria. The document can act as a guideline for the company and connected stakeholders.
What is Procurement Management?
Procurement management is a strategic approach to project expenditures management and optimization. It’s used for everything from acquiring products and services to procurement, purchase orders, contracts, expediting, certification, and accounting, among other things. A single procurement failure can interrupt production, have a negative influence on the company’s bottom line, and cause the project’s execution to be delayed, if not completely halted. Project management teams will need to merge all procurement operations.
A procurement management strategy will standardize how all phases of the procurement process would run all through the project.
Why is it important to have a procurement management plan?
A solid procurement management plan helps in saving money, labor, and work while also ensuring corporate integrity. It’s because a plan aids in precisely defining the project from beginning to completion. It also guarantees that everyone engaged knows every step of the process, from the beginning to the end. Let us just take a closer look at a few of the key factors that point to the requirement for a procurement management strategy:
- It aids in the evaluation of prior procurement processes and the comparison of related activities
- It lists the total demand that is estimated to be met within the project’s timetable
- It aids in the creation of a procurement timetable that can successfully carry out the procurement process as well as the establishment of timeframes to meet demand
- It improves software and technologies that can perform mundane tasks and focus attention on a key aspect of the procurement process
- It guarantees that the project is simplified and manageable for the many parties involved
- It promotes friendly and collaborative efforts between members of the project team to achieve a common goal.
- It is based on probable future projections and allows for greater openness in the whole procurement process
- It allows for the aggregation of comparable needs into a single contract or the creation of separate divisions for contractual arrangements and packages.
Things to keep in mind while creating a procurement management plan
The procurement management strategy will be determined by the project’s scale and influence. Procurement Managers, on the other hand, might think about general aspects while putting up their procurement management strategy.
- Tasks and duties
To keep the procurement process running effectively, several critical roles and duties are necessary. Procurement managers, in particular, are responsible for controlling the project budget, timetables, risks, and handling the technical needs of contractors, among other things. Identify precise duties and responsibilities, establish authority limits for various parties, and eliminate considerable overlap.
Most procurement team members will need to prepare an assessment before tendering on a project to ensure that the budget provides for procurement operations. To estimate the time worth of money and guarantee proper responsibility for the cost of capital, procurement managers might use present value assessment and other capital budgeting methodologies. If project results are intangible, procurement managers can use a cost-benefit analysis to generate a procurement management plan projection.
- Timetables for projects
Procurement managers must outline the activities that each contractor will accomplish since vendors, contractors, service providers, and manufacturers can all have an impact on the project timeline. To do it, procurement managers must create a statement of work (SOW) or terms of reference (TOR) that details the contractor’s job needs. This paper will serve as the foundation for their price and timetable. This enables procurement managers to better control the timeline and price within the task structure, avoiding micromanagement, which can lead to strained contractor ties.
What is the best way to make a procurement management plan?
Let’s look at a few of the measures project managers use to construct their procurement management plan given that we have a better understanding of the essential components.
Step 1: Outline the conditions of the contract.
Procurement teams must define the objects and services to be procured in particular terms, considering sizes, benefits, rationale, and so on. Any technical information necessary for the procurement process should be included at this point in the procurement management strategy. Furthermore, procurement managers must specify the date by which the goods are needed. They must also provide a list of personnel who has approved the transaction.
Maximizing the purchase terms’ highlighting:
- Make use of templates. Templates make it simple and quick for procurement teams to describe and detail procurement conditions and distribute them to the group and vendors.
- Utilize software that allows for computerized approval workflows. Procurement teams may utilize automation software to speed the demand processing and authorization management process, avoiding the tedious back and forth approval and purchase procedure.
Step 2: Decide on the sort of agreement you want to make.
A contract is an agreement between a vendor and the project coordinators, project sponsor, or corporation that specifies how expenses will be handled. There are, nevertheless, a variety of contract forms, such as cost repayment and fixed price agreements. In the procurement management strategy, the managers must establish the kind of contract to describe the cost specifications, such as materials costs, billing rates, and any additional fees. Contract management specifics, such as e-signature standards, contract management platform procedures, and so on, should be included in this part of the procurement management strategy.
Step 3: Recognize and minimize threats.
The best practices in the procurement management strategy, will always include identifying and reducing risks. And besides, most projects include risks that might affect the timetable or completion date, this is why procurement managers must identify those that affect the procurement process. Possible shipment delays, vendor disagreements, unreasonable cost expectations, and things like a contractor failing to deliver to requirements and fulfill timelines can all affect project quality control. Procurement managers must incorporate risk mitigation techniques to achieve success. For example, if the selected subcontractor fails to perform the project assignment, procurement teams must propose different substitute contractors.
Step 4: Calculate the cost
In the procurement management plan, procurement teams have to come up with a methodology for determining the expenses. A request for proposal (RFP) is a document that describes the procurement requirements and asks companies to submit bids. Bids will often include a description of the vendor’s products or services, how they will complete the task, their previous expertise with the sort of work, a cost estimate, and timetables.
How can Kissflow Procurement help you build a procurement management plan?
Backed by a team of procurement experts, Kissflow Procurement cloud enables businesses to develop a proactive procurement management system that gives them a strategical edge over their competitors. Kissflow Procurement Cloud also provides the knowledge and tools a company requires to manage procurement end-end as businesses grow. Sign up for free to know more.