10 Steps to Create a Procurement Management Plan

It’s no great secret that being well organised will lead to better time management and more productivity in the workplace. Putting an effective procurement management plan into place will save you noticeable time on your time clock app of choice, allowing you to make clear cut plans and achieve more in your day.

A detailed and easy to follow procurement management plan will cut out confusion in the procurement process, help identify potential risks, and leave you with a backup plan for that rainy day where plan A fails.

What is Procurement Management Planning?

When your business needs to find a supplier for some good or service which is essential to the operation of your business and completion of your relevant project, such as (for example) personal protective equipment for a large construction project, your procurement management plan is the process which you will undergo to identify and select potential vendors while accounting for potential risks and creating the procurement management approach you will take towards the procurement planning process.

Ultimately, you want to have a document which identifies what you need, what the associated risks and costs are, and what kind of relationship you are looking to create between your business and any potential supplier. You want to identify the time period in which you are expecting to accomplish your procurement, as well as having a clear outline of what your processes will be if something in the process goes wrong.

Why Do You Need a Procurement Management Plan?

To Outline the Needs of Your Business

It might seem like an unnecessary thing to do –after all, you know in your mind what you are trying to get done. But the real value of this document is in getting everyone involved in the project on the same page as one another. A procurement plan will make sure you don’t overlook anything and create real clarity amongst your team about what you are trying to accomplish.

To Identify Potential Procurement Risks

There is a lot that could go wrong in the procurement process which isn’t immediately obvious. What will you do if there are issues with your supplier? Perhaps goods are faulty, or being shipped late, or any number of other issues which could threaten the progress of your project. A detailed procurement management process will have identified what could have gone wrong and made back up plans to help mitigate the damage.

To Find the Best Supplier for Your Situation

You want to create a relationship with your supplier which is positive for your business, and to choose the best option possible to make sure your project will be a success. Going through the procurement management process will let you analyse potential suppliers against the unique needs you have as a customer and make a selection which will most benefit you.

How to Create a Procurement Management Plan

1.    Outline Your Needs and Expectations

You want to be very clear about the needs you have for your project – what is it that you are looking to buy, and why are you looking to buy it? You can use a procurement plan template to help structure the plan you are building and to make your plan easier to follow and understand. Start by identifying the purpose of the plan –what is it you are looking to accomplish by creating a procurement management process?

2.    Analyse the Market

Now you want to take a look at the market for the goods you are procuring: are there a couple of dominant suppliers, is there even a supplier in the market capable of handling the demand for your project? How deep your analysis should be really depends on the scope of your project (and how reliant it’s success will be on the procured goods) so be careful and consider whether spending more or time on this will increase the value it provides to your overall plan.

3.    Detail the Potential Costs

No project operates on unlimited funds – an important part of your procurement management plan is identifying not only what the costs associated with procurement will be, but making sure those costs will fall within an acceptable range. The worst thing you could do would be to overspend and use up too much of your project budget on your procurement processes.

4.    Create an Evaluation Methodology

Identify how you will be evaluating potential suppliers. It may be that you will weigh cost as the most important metric for judging which suppliers you will choose, but there is also value in considering whether a suppliers reliability/reputation might make them a safer bet for avoiding potential risks in the procurement process. Do you need to procure good of high quality? If you are looking at something like safety equipment, then obviously the quality is highly important, but for goods that may not have critical impact on your project you might look at saving some money on lower quality items.

5.    Outline Key Dates

It is important for you to know exactly when you will need to have finished your procurement process. Securing an excellent supplier and saving money are great, but not if you end up with a supplier who is unable to meet your time frame requirements. Late shipping could have a huge impact on the progress of your project, depending on the necessity of the goods you are waiting for.

6.    Identify Potential Risks

What could go wrong in your procurement process?What will you do if your goods arrive damaged, or arrive late? Identifying risks will allow you to be proactive in mitigating the negative effects they could have on your project. After assessing risks, you can create a ‘plan B’ to execute in worst case scenarios which could be the difference between success and failure for your team in the even that something goes wrong.

7. Assess the Nature of Your Relationship with the Supplier

The type of relationship you have with your supplier could have a strong effect on the quality of service you receive, as well as the risk potential involved in the procurement process. If your project is going to be totally reliant on the procurement of goods from this supplier,it is important that you identify this early. It may be that your custom is minor in the eyes of the supplier, or that your business will be highly valuable to them. These considerations will affect the power balance of the relationship you have with your chosen supplier, whether or not you will be able to dictate certain terms or whether you might be dictated to. Understanding the balance of your relationship will help you to better navigate the procurement process.

8.    Identify Your Exit Strategy

All things come to an end. Your relationship with your supplier will not last forever, whether because your project has come to completion or because your supplier has exited the market. Ultimately, you need to have a plan in place for how these events might occur. A clear end of contract will make the termination of your relationship with the supplier easier to manage, while having a back up plan for who to go to if your supplier disappears suddenly will save you strife in the worst case scenario.

9.    List Proposed Contract Terms/Conditions

Your expectations, and the expectations your supplier has of you, should be clearly defined from the outset. Knowing and having clearly established these conditions will allow you to make a more informed decision about how you will manage your procurement process.

10.  Establish Communication Processes

Communication is key to any successful relationship, but it is even more important if you are going to be reliant on your supplier for the ongoing success of your project. You should have a clearly defined method and process of communication – know who you need to talk to in order to get the information you need, and make sure your supplier knows what information you expect to have and who in your team they need to be sending it to. You will be in for fewer surprises if you are able to keep each other up to date on everything happening in the procurement process.

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