Procurement refers to the process of finding vendors and contracting with them for the goods and services your company needs to operate. It’s more than mere purchasing, but includes everything that happens throughout the process of receiving materials and services.
Getting everything you need together from multiple suppliers and vendors, in the same place at the same time, is so complex that you definitely need a solid plan to pull it off. A good procurement management plan will help the project manager keep the project manageable for all involved. Here’s what you need to do to create one.
Table of Contents
Define What Needs to Be Procured
Before you can begin the procurement process, you need to clearly define what needs to be procured. What items or materials do you need? What sizes or types? What amounts? What about services? Write down everything you need and include any technical information that might influence what kinds of goods or services you need. Don’t forget to include in your procurement plan some justification for why you need each of the items, materials, or services – what role does each play in the manufacturing and distribution process?
Establish Roles and Clarify Responsibilities
Now is the time to make sure that everyone who will be involved in the procurement process is up to speed. Everyone who will play a role in procurement needs to understand his or her individual role and the scope of the work involved. Define clear role boundaries so that duties don’t overlap.
Put Together a Timeline
Procurement processes obviously need to be completed on a certain timeline in order to meet your manufacturing and distribution goals. Hammer out scheduling details and break down each part of the procurement process into discrete tasks with start dates and due dates.
Pinpoint Risks and Mitigate Them
Risk is always inherent to procurement processes to some degree. There’s always a chance you could experience materials or parts shortages, shipping delays, supply chain disruptions, and things of that nature. Unrealistic cost
expectations, conflicts with vendors, and scheduling difficulties are among some of the issues that can crop up.
Anticipate the risks to your procurement process and plan to address them. Consider alternative sources for parts and materials, or replacement contractors you can call, for example. It’s best to assign a team member to anticipate and address risks as they emerge.
Gather Proposals and Calculate Costs
To start to get an idea of how much contracting services, materials, and supplies will cost, put out a request for proposals (RFP) and collect bids from interested vendors. The proposals you get with spell out vendor costs, allowing you to begin calculating how much your project will set you back.
Clarify Selection Criteria
Don’t let your review board go into the vendor selection process without clear criteria for what you need in a vendor. Selection criteria can include things like a vendor’s ability to adhere to your scheduling requirements; the quality of the work, materials, or parts being offered; the vendor’s compliance with the instructions in the RFP; and the quality of the vendor’s previous performance.
Establish an Approval Workflow
Contracts have to go through an entire approval process before they can be sent out for a signature, and it’s best to establish that workflow beforehand so everything can happen smoothly. Outline all the steps that have to lead up to contract approval, such as review of bids and proposals, negotiations, reviews of custom clauses, and so forth. Name the decision makers who will need to approve the contracts, and specify in what order they will need to approve them.
Outline Vendor Management Processes
Once you have vendors lined up and contracts signed, you will need a vendor management process to keep the relationship friendly and productive. Each vendor you use should have performance metrics to adhere to. Rate them on their ability to keep to schedule, the quality of the services or goods they provide, and their cost. A rating system will produce data that you can use when choosing vendors for your next project, and it will reveal areas where your vendor relationship could use improvement.
A strong procurement management plan can ensure that your projects remain streamlined as they reach completion, without hiccups like supply shortages, vendor issues, or late deliveries throwing a wrench in the works. Make sure you know exactly what to expect from your next procurement process – and every one thereafter, with the right procurement management tools and strategies.
