Accounts Payable
How to create a procurement management plan

How to create a procurement management plan

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Creating an effective procurement management plan can improve your efficiency and ensure that you meet your project requirements. Whether you're a manufacturing company or a project manager, you'll discover that a procurement plan can help you think more strategically about your business objectives and mitigate potential risks.

Here's how to develop a procurement management plan that supports your goals while maintaining strong supplier relationships.

Key takeaways

Your procurement management plan outlines specific steps to explain how your procurement processes will satisfy your project objectives.

Using procurement management templates will provide you with a general outline that can help streamline the process of creating your plan.

One of the best ways to optimize your procurement management process is through technology and automation.

What is a procurement management plan?

A procurement management plan defines your project goals and seeks to develop procurement strategies that achieve those goals.

Your procurement plan will outline specific steps to explain how your procurement processes will satisfy your project objectives. Project managers may give considerable guidance to procurement planning, raising such questions as:

  • What goods or services does the project team need to achieve their goal?
  • What is the estimated cost of these goods or services?
  • When do these items need to be purchased?
  • Will your organization need to reorder these goods or services?
  • How will your procurement strategy address supply chain risks?

Therefore, your procurement plan should align with your project management plan to ensure that project milestones are met and that you maintain a healthy procurement lifecycle.

A solid procurement management plan will also aid in vendor management, risk management, and other crucial components of your procurement process. That's important since 49% of businesses continue to worry about supply chain disruptions. Having a plan in place can mitigate risk throughout your project lifecycle.

Basic components of a procurement management plan

A well-rounded procurement management plan will contain several core elements. They include the following.

Procurement strategy

This initial step ensures that your procurement activities align with your company or project goals. Project managers can provide input into this step, ensuring that your procurement management process satisfies the goals for the project and that the project fits within your procurement budget.

Procurement processes

Every procurement management plan should outline your procurement process. Your procurement process can include the following:

  • Initial market research
  • Researching vendors
  • Purchase requisitions
  • Purchase orders
  • Payment processes
  • Contract approval process

This part of your procurement management plan lists the specific details of how you purchase goods or services. Optimizing your procurement process in this way can streamline your entire procurement management plan.

Roles and responsibilities

Who is responsible for each step in the procurement process? The people involved can include the project manager or other project team members, as well as members of your accounts payable department. Make sure to outline specific duties and encourage collaboration for increased accountability and communication.

Vendor management

Vendor management involves selecting vendors, evaluating their performance, and managing relationships. This portion of your procurement plan will help you maintain strong relationships with your suppliers while ensuring that your vendor contracts align with your project budget.

Contract types and administration

Your plan should clearly define what type of procurement contracts you'll be using, such as a fixed-price contract or a contract for time and materials. Procurement management plans should also include some basic provisions on resolving disputes and keeping your vendor relationships running smoothly.

Risk management and quality control

Once you receive your goods or services from a vendor, you'll need an evaluation process that ensures that the goods you received are of sufficient quality and that the vendor has upheld their end of the contract. A procurement management plan should also include a risk management plan that identifies procurement risks, such as delays or breaches of contract.

Procurement management metrics

Maintaining clear procurement documentation will help you evaluate your procurement process and ensure that you adhere to your project schedule. Evaluation criteria can include the speed at which you receive your goods or how the cost impacts your project scope.

Communication strategy

The final component of your procurement management plan should include a strategy for communicating your procurement process to project team members or other stakeholders. A thorough understanding of the procurement process can be invaluable during project planning and help team members better determine a project completion date.

Procurement management plan example

Here is a chart summarizing the information that you could find in a procurement management plan example:

Section Details
Purpose This procurement management plan will establish the processes, procedures, and guidelines for acquiring goods and services required to successfully complete the project.
Objectives The objectives are to ensure timely procurement of required resources, obtain goods and services at the best value for the project, comply with project budget constraints, mitigate procurement risks, and maintain transparency and accountability throughout the procurement process.
Procurement Team The procurement team includes the Project Manager for overall management, the Procurement Officer for executing procurement activities, and Project Stakeholders for input on requirements and vendor selection.
Procurement process The process includes identifying needs, sourcing vendors, evaluating and selecting vendors, negotiating contracts, awarding contracts, and managing contracts.
Procurement documents The procurement documents include requests for proposal (RFP), requests for quotation (RFQ), contracts and agreements, purchase orders, and vendor evaluation reports.
Risk management Risk management involves identifying potential procurement risks, developing mitigation strategies, and regularly monitoring and reviewing processes to address emerging risks.
Communication Communication is maintained through open channels with vendors, stakeholders, and project team members, with regular updates on procurement activities and milestones.
Budget management Budget management includes monitoring expenses against the project budget, implementing cost-saving measures, and obtaining approvals for budget adjustments.
Quality assurance Quality assurance ensures that procured goods and services meet standards and project requirements through inspections and quality checks.
Compliance Compliance involves adhering to laws, regulations, and organizational policies, and maintaining accurate procurement records.
Procurement schedule The schedule outlines key milestones and deadlines for each activity and is regularly reviewed and updated as needed.
Closeout The closeout process ensures completion of all procurement activities, final review of documentation and contracts, and obtaining necessary approvals.
Approval This plan requires review and approval by the project manager and stakeholders, and should be signed and dated.

7 steps to create a procurement management plan

Ready to create a procurement management plan for your next project? Follow the following steps to create one.

Steps to create a procurement management plan

1.Define procurement objectives

Always start by defining clear procurement objectives. You may be making a purchase for your regular business operations or to satisfy a specific procurement project. Defining your goals will streamline the process and ensure that you measure success.

2. Develop strategies for procurement

Your next step will involve careful research and planning. What are the best methods for obtaining the goods and services your project requires? This step will require you to research vendors and compare options to determine the best way to purchase your necessary materials or services.

3. Create a procurement budget

Once you have a better idea of the price of the items you need, you're better prepared to create a procurement budget. Your project management team can provide further insight into additional needs that should be addressed, as well as any risk management strategies you should undertake.

4. Start the vendor bidding process

To obtain the best price, you'll need to solicit bids from potential suppliers. Compare multiple suppliers' prices and payment terms so you can get the best value. And make sure that your suppliers can overcome operational risks, such as delays in delivery or supply chain disruptions.

5. Compare bids and select suppliers

Aim to compare bids from at least three different suppliers. Doing so will ensure you and your project management team find the best price for your supplies and raw materials. You can also avoid supply chain disruptions by diversifying your supplier network—this means you'll source materials from multiple suppliers to ensure delivery.

6. Manage the procurement process

Make sure that your procurement management plan contains steps to actively manage the procurement process. These steps include monitoring vendor contacts, paying invoices promptly, and ensuring that the quality of the goods and services you receive meets your high standards. Delegating responsibilities to your team members is also important in managing the process.

7. Close out your procurement process

At this point, you're ready to close out the procurement process. This step involves ensuring all necessary payments have been made and all parties have satisfied their contractual obligations. Now is also the time to review your procurement processes to find ways to improve for future projects and business activities.

Procurement management plan template

What's the best way to optimize your procurement plan? Procurement management templates will provide you with a general outline that you can use to create your own plan. Using a template can streamline the process in the future. While every procurement plan is different, a template provides a basic framework by which you can achieve your strategic goals.

Procurement management plan template

Using automation to enhance procurement management

One of the best ways to optimize your procurement management process is through technology and automation. BILL offers business leaders the tools they need to streamline their accounts payable process, ensuring fast, smooth approvals and timely payments.

BILL customer Marine Layer has a manufacturing and procurement process that can be quite complex. So to streamline financial operations, save time, and more efficiently use their accounting team’s resources, Marine Layer turned to BILL.

By using BILL, you'll increase your efficiency, allowing you to accomplish more with less. That's important for growing businesses. BILL can become the partner you need to rise to your latest challenge.

The information provided on this page does not, and is not intended to constitute legal or financial advice and is for general informational purposes only. The content is provided "as-is"; no representations are made that the content is error free.