Procurement management refers to the process of acquiring services or products through outsourcing. When you spell this process out on paper, you’ve created a procurement management plan.
A procurement management plan is essential if you want your projects and manufacturing processes to go smoothly. It defines what items and materials need to be procured, what kind of contractual agreement will be entered into in the service of that goal, and more. Follow these steps to create a procurement management plan of your very own.
Outline the Terms of Procurement
Before you do anything else, you need to identify the roles and responsibilities involved in the procurement process. You also need to specify what materials or items are to be procured, in detail – list sizes, types, and other information about what you’re procuring. Explain how the product, material, or service you’re procuring will serve your business, and justify why you need it. Include any technical data about the procurement process or the items and materials you’re procuring.
You should also specify a timeline for procuring all of the items and materials you’ll need. You might need different things on different dates, so specify that in your written procurement management plan. Finally, list the people who need to approve the purchases so you can streamline that part of the process later.
Choose a Type of Agreement
You’ll need to sign a contract with a vendor in order to procure the products and services you need, but there are many types of contracts. A few general categories include time and materials contracts, fixed-price contracts, and cost-plus contracts. Clarify which type of contract(s) you’ll be using for procurement.
Pinpoint and Mitigate Risks
Risks are inherent to any procurement process – just as they are inherent to any supply chain. Early in the planning process, try to anticipate what risks your procurement process might be facing and list them out. The right procurement management tool can help you mitigate them.
Figure Out the Costs
The contract you sign will ultimately nail down your costs in terms of materials, time, and other expenses. But before you can get to that point, you have to find out what vendors are charging for the materials and products you need. Put together a request for proposal (RFP) to get quotes from vendors. This will give you a much better idea of how much you can expect to spend on procurement, and you’ll usually get the best deal when vendors are competing to undercut one another.
Establish Approval Requirements and Processes
Contracts can require approval from a whole host of middle managers and higher-ups before they’re ready to be sent out for signatures. Outline the approval process for contracts. Lay out step-by-step what needs to happen to have the contract approved. Usually this will commence with a review of bids and proposals and an analysis of costs and service.
Name the decision-makers who will need to sign off on each clause of the contract before it can go out for signature. List their roles. Specify the order in which these persons need to sign off on the contract. An appropriate approval workflow will make it easier to get each contract properly approved in a timely fashion.
Spell Out Vendor Selection Criteria
Don’t forget perhaps the most crucial part of procurement – deciding which vendor proposal to choose. Clarify the criteria the review board should use in determining which vendor to give the contract to. Cost shouldn’t be the only factor. You should also consider quality, the vendor’s ability to work within your schedule constraints, the vendor’s performance history, and each vendor’s compliance with the requirements of the RFP.
Specify Vendor Management Strategies
Procurement doesn’t end when the contract is signed. You also need a strategy for managing your vendors. Outline the schedule on which you need the products and services delivered, and the level of quality you expect from your vendors’ products and services. Specify how often the project manager needs to meet with the vendors and the purchasing department, how and where those meetings will occur, their purpose, their hoped-for outcomes.
Establish metrics by which you can measure the performance of your vendors. These should include quality, timeliness of delivery, final cost, and so forth. Set up a schedule for regularly evaluating vendor performance, so you can address performance issues as needed and hopefully nip them in the bud.
Procurement management isn’t something you should go into blindly. Outline a detailed plan beforehand, so you can iron out the wrinkles in procurement and keep your facilities humming.