Procurement Plan – 10 easy steps to create one yourself
Do you have a procurement plan ready? As a procurement manager, it’s your job to always create a good procurement plan and to have it ready and up to date all the time.
And so, we are going to discuss just that. We are going to learn about the procurement plan and how to create one using simple yet proven effective steps.
Once you’re done with this article, you will be able to write your own procurement plan and your team can start calling you “The King of Procurement Plans.”
The Procurement Plan – The importance & Basics
Procurement planning is the process of consolidating and identifying requirements and determining the timeframes for their procurement to have them as and when they are required.
To put it into simple terms, procurement planning is about creating a schedule of when and where the procurement will happen. The planning also includes making sure that the items or services procured are in good condition and exactly what you are looking for.
Creating a procurement plan is a must. It’s not just because a company demands a plan must be made, but because the law also in some areas requires the creation of a procurement plan:
- Aggregate its requirements wherever possible, both within procuring entities and the procuring entity. It is also to obtain value for money and reduce procurement costs.
- Make use of rate or running contracts when it is needed to give an efficient, cost-effective, and flexible means to buy the supplies needed for the continued operation of the company.
- Integrate the expenditure program with the procurement planning
- Avoid the splitting of procurement to deal with an even bigger procurement issue.
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The Benefits of a good Procurement Plan
Procurement plans provide documentation for the whole procurement process, which is very valuable to all procurement teams in any company. They can use the procurement plan as a reference or guide if there is a need for a procurement project once again.
Other benefits of having a procurement plan include:
- Helping organizations collect similar requirements under one contract.
- Divide complex requirements into multiple contract packages to maximize cost savings
- Allows companies to determine any additional staffing needs.
- Helps companies collect similar requirements under one contract, as well as divide complex requirements into multiple contract packages to maximize cost savings.
- Provides an opportunity for all stakeholders to meet and discuss the requirements they feel are needed.
- Allows companies to estimate how much time will be required to complete the procurement process and close all contracts.
What should be included in a good Procurement Plan?
As stated, the procurement plan is an important tool for the procurement manager. You need it. You can’t start the procurement process without it. You and your procurement team should build a concrete procurement plan to buy the supplies needed in a timely and orderly fashion.
Of course, procurement plans come in many details. This is why we at Procurement Tactics are more than happy to share our knowledge and more through the Negotiation Gamechanger Course. Check out our course for all the amazing goodies that we can teach you about procurement!
The procurement plan should always have the following elements for it to be efficient:
- Identification of the type of contract that will be used in the deal
- An explanation of the metrics that will be used to judge the supplier’s performance.
- Identification of the organizational standards that must be followed.
- Planned delivery or implementation dates for the products or services being provided.
- The number of suppliers involved and an explanation of how they will be managed.
- An explanation of how acquiring the new services or products will affect the constraints and limitations of the project plan.
- Identification of all vendors who have prequalified for the project.
- An alignment of lead times with the project schedule
Once you have all that set up, it’s time to start writing the procurement plan.
How to Write your own Procurement Plan
Writing the procurement plan may sound like a big task, but if you have everything that is needed right, then you should have no problems writing and building the plan.
1: Explain the procurement process
This is where you provide a section of the procurement plan that needs to be taken to get the needed products or services from a supplier. There should also be an explanation of what must be done to manage the process
2: Identify roles and responsibilities
This section is where you identify the different people who are working on the project and all stakeholders who will be affected by the project. The different roles involved in the procurement process should include:
- Technical managers who create the statement of work and oversee the technical vendor requirements.
- Project managers monitor the process and control the budget, schedule, and project risks.
- Contract managers who provide advice and documentation related to the project’s contract requirements
- C-level executives who provide services on a contract and make decisions related to the contract. These executives are responsible for reviewing and approving the final contract agreements.
- Lawyers who help with the creation of the contracts and provide advice for any related legal requirements.
3: Identify the procurement needs and requirements
The first section of the procurement plan should describe the services or products the company is looking to buy. It should also have an explanation and justification for why the products or services are brought from an external supplier.
4: Define the procurement timeline
This section is all about the timeline for the project and it describes the timeframe in which the services or products are needed. This section helps procurement teams better by understanding when the procurement process should be started and when it needs to be completed.
5: Define change approval processes
This part is where the company’s change management processes, specifically how changes can be made to the procurement processes and documentation. The section should include an explanation of how to ensure the changes are necessary, understood, and approved by the right people.
6: Identifying vendor management techniques
This section of the procurement plan should explain the techniques used to manage vendors once they have signed the contract. The goal of this area in the procurement plan should be to ensure vendors must fulfill their side of the deal and provide the company with the products or services they requested at the quality that the company expects.
Vendor management should include the following:
- Creating an SOW that outlines the project timeline, deadlines, and compliance requirements.
- Detailing vendor selection criteria that are based on cost and risk analysis
- Using key performance indicators (KPIs) to measure the product or service quality
- Conducting regular meetings.
- Requiring the vendor to provide the project owner with regular project updates.
7: Define relevant legal jurisdiction
Legal requirements for the procurement process must be identified to ensure the company and vendor follow the law. Legal requirements must also be identified to ensure all stakeholders are aware of the laws and that they do not violate the legislation.
8: Identify payment methods
This section of the procurement plan identifies the different payment methods and currencies that will be used and accepted during the procurement process. If payments are to be made periodically, such as monthly or annually, then the terms for these payments must be detailed to ensure that there is no conflict between the company and the vendor regarding payments.
9: Explain risk management processes
Working with an external supplier can expose you to new risks to a procurement process that would not be relevant if the process was internally sourced. This section of the procurement plan should explain the risks of the project, including:
- Risk tolerance
- Risk probability
- Risk severity
- Types of contracts used
- Policies and procedures outlined in the contracts
- Review and approval processes for requirements
The statement of work is an important element of an organization’s risk management processes. The SOW defines the necessary project activities, deliverables, and timelines that the vendor needs to follow to fulfill half of the deal. Giving vendors an SOW reduces risk by ensuring that the supplier knows exactly what is expected of them.
10: Identify project constraints and limitations
A procurement process is not one without limitations and constraints. This section provides all the constraints and limitations that the procurement team and vendor must deal with. It can include the following:
- Legal compliance
- Budget restrictions
- External stakeholders
- Scheduling limitations
- Geographic restrictions
- Security requirements
- Specifications and standards
What is a procurement plan?
A procurement plan is a detailed walkthrough of how the procurement process should go from start to finish.
How to make a procurement plan?
To make a procurement plan, you need to have all details fleshed out. Details include vendors selected for the procurement, the budget allocated, and contracts used for the procurement.
How do you plan the procurement process?
To plan the procurement process, you and the team must discuss how the procurement should start, how to source vendors, make sure the contracts follow the law, and that the supplies procured are in good condition.
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