How to Create a Procurement Management Plan in 7 Steps

How to Create a Procurement Management Plan in 7 Steps

Deskera Content Team
Deskera Content Team
Table of Contents
Table of Contents

Whether you are going for a trip or setting up something new, a structure is essential to guide you in the process. Similarly, building up a plan towards a successful procurement process is equally important.

It is to note that having a procurement plan is one thing, and effectively managing it is another.

An organization can be good in procurement only if the right plan supports it. After understanding the critical role of the procurement process, the next step is to have a thorough plan based on the organization's information and whereabouts.

Procurement Management

In this article, we will discuss the process, components, and steps to create a procurement management plan along with the following:

• What is Procurement Management Plan

• Why Procurement Management Plan matters

• Components of Procurement Management Plan

• Role of Procurement Management Plan

• Process of Procurement Management Plan

• Create Procurement Management Plan in 7 steps

• Procurement Management Plan template

• How can Deskera help in creating Procurement Management Plan

What is Procurement Management Plan?

A procurement management plan is a plan that defines requirements for a particular project and lays down the steps required to get into the final contract. Here, the specific project means the process required to purchase or acquire the products or services the organization deals in.

The plan sets and defines everything related to procurement, i.e., the items to be procured, contracts, contract approval process, cost determination, and decision criteria.

Overall, the procurement management plan decides the framework of the project. It can act as a guide for the organization and related stakeholders throughout the life of the project.

A procurement management plan is always flexible and can be modified as per the changes happening in the environment or the organization, enhancing smoother business operations.

Why Procurement Management Plan matters?

A good procurement plan always opens the door to save money, time, and effort, resulting in organizational compliance.

It is because a plan helps to define the project from start to end clearly. It also ensures that everyone involved understands every step right from the initial stage to the completion.

Let's take a look at a few of the important reasons bringing insights towards the need for a procurement management plan:

  1. It helps to analyze the previous procurement process and compare the related activities.
  2. It lists down the overall demand expected to be procured during the timeline of the project.
  3. It helps to set a procurement schedule that can effectively carry out the procurement process and establish timelines to fulfill the demands.
  4. It enhances software and tools that can handle the routine work and drive concentration towards a significant part of the procurement process.
  5. It ensures that the project is streamlined and easily managed by the stakeholders involved in the process.
  6. It establishes cordial and coordinated efforts between the project team members to work together towards a common goal.
  7. It is based on the possible predictions that may occur in the future and provides room for transparency of the overall procurement process.
  8. It allows consolidation of similar demands under one contract or may create different divisions for different sets of agreements and packages.

Remember,

"A goal without a plan is just a wish. It is with a plan; you can move nearer towards your goal."

Components of Procurement Management Plan

A procurement management plan deals with the overall strategy and the management of the project.

It also outlines the different sets of requirements laid by other groups of stakeholders.

As per the plan, the following are the overall nine main components of a Procurement Management Plan. It includes:

1.     Estimating

2.     Project scheduling

3.     Vendor control

4.     Pre-qualified Vendors

5.     Roles and responsibilities

6.     Risk management

7.     Legal jurisdiction

8.     Payments

9.     Constraints and assumptions

1. Estimating

Money is vital at every step!

Before bidding with the procurement process, it is crucial to estimate the funds required for the project. In estimation, factors like net present value analysis, capital budgeting, cost-benefit analysis should be compared and analyzed for future reference.

2. Project scheduling

A project schedule clearly defines a task, start date, finish date, and the project's budget. It is crucial to divide the work into different tasks for different roles, including external contractors, vendors, and suppliers of service providers.

3. Vendor control

Vendor control is an essential function in the process. It helps to ensure that the work of vendors is acceptable. Vendor control techniques should be a part of a plan that clearly defines the statement of results and references.

4. Pre-qualified vendors

After setting up the vendor control techniques, it is vital to pre-qualify the vendors you want to work with. You can set your criteria for their qualification through past works, project team descriptions, work methodology, etc.

5. Roles and responsibilities

A procurement management plan defines the roles of the people involved to run the process smoothly. It clearly defines the role of project managers, technical managers, contract managers, operational managers, and lawyers and set their work boundaries

6. Risk management

When you are working with a different set of parties, the element of risk is always high. A procurement management plan should have a risk profile for each project that involves risk level, risk tolerance, level of details, contracts, policies, and reviews.

7. Legal jurisdiction

A procurement management plan should always be addressed and equipped with legal jurisdictions. It helps bind the project, make stakeholders aware of their work, and act accordingly.

8. Payments

A procurement management plan should always define the terms of payment, modes, and methods based on the project. This component is essential to avoid any conflicts and issues that may arise in the future.

9. Constraints and Assumptions

A plan is constantly made, considering different constraints and assumptions that may occur in the future. It may include standard specifications, schedules, environment, geographical settings, ground conditions, quality, or security.

As you can observe, these are the set of components required to finalize the plan.

"Good procurement is equal to successful projects."

Role of the procurement management plan

The role of a procurement management plan is not just limited to understanding the project but also helps meet the requirements required to keep the project going.

Following are the five significant roles performed by the Procurement Management Plan in an organization:

  1. Create a well parallel strategy
  2. Incorporate stakeholders in the process
  3. Ensures timeliness of the project
  4. Monitor the progress
  5. Enhances comparison and rectify issues

1. Create a well parallel strategy

A procurement plan helps define the strategies based on the market conditions, external factors, price, and risk associated with carrying out the project.

It helps to define the items used in the overall process.

2. Incorporate stakeholders in the process

Stakeholders are the lifeblood of the projects. With a procurement management plan, you can get in touch with various suppliers and vendors by making them a part of your process. In return, they will provide the best services, leaving you satisfied in the end.

3. Ensures timeliness of the project

A proper procurement management plan lays down this specification associated with the different items involved in the process. It also helps to give timelines for implementation of the project, who will be responsible, and what is to be done by covering everything as a whole.

4. Monitor the progress

Monitoring and evaluating the procurement process is vital at every step. It is crucial to know about the progress of the work and record it for reference.

5. Enhance comparison and rectify issues

As soon as the purchasing process starts, it is essential to compare it with the actual process stated in the plan after a specific time. If your plan matches the current state, it's good, and if not, understand the deviations and adjust the plan to rectify the same.

The points mentioned above clearly define the role of a procurement management plan at every stage and step of the process.

Process of Procurement Management Plan

The process of the procurement management plan is based on the nine components that we discussed earlier in this article.

The process of the Procurement Management Plan can be categorized into the following steps:

  1. Decisions related to the inputs and items to be procured internally or externally
  2. Setting up budget constraints and financial scope
  3. Creating criteria and frameworks for the selection of potential vendors
  4. Setting roles and responsibilities to be assigned to different stakeholders
  5. Making a provision of risk factors that can be involved in the process
  6. Setting up legal requirements and jurisdictions for contract
  7. Ensuring payment protocols like mode, time of payment, currencies, etc
  8. Creating a plan based on constraints and factors affecting it
  9. Document the program based on organization policies and approval of stakeholders along with a common seal.
  10. Time to implement the project with your actions

And you are done!

Create Procurement Management Plan in 7 steps

A procurement management plan is not made randomly. Instead, it is based on a series of steps involved to create an effective plan. The plan is inclusive of the parts involved in the procurement process.

Thus, a procurement management plan can be divided into the following seven steps:

  1. Clearly define roles and responsibilities
  2. Create a schedule for operations
  3. Identify and mitigate the risk associated
  4. Determine the cost involved
  5. Establish criteria and workflow
  6. Set up vendor management
  7. Review and further approval processes

1. Clearly define roles and responsibilities.

The first step towards building a procurement management plan is to identify the people who will be working on the project. The action ensures that all the parties involved understand the responsibilities and scope of their work.

The importance of the step is easing out the process and setting boundaries such that there is no duplication of efforts or overlapping of responsibilities.

The different roles include project managers, corporate executives, contract managers, suppliers, and vendors.

2. Create a schedule for operations

Scheduling of operations means the setting of different timelines of the work based on the project.

For example, the purchasing process can be done in 10 days, and the packaging process can be done in 5 days.

Breaking out of these tasks with a set of different and estimated dates can help understand the procurement process well and set the completion time.

3. Identify and mitigate the risks associated.

Risks are an inherent part of a project. It is bound to happen, and that no organization can avoid it. Yes, you can surely minimize the risk by setting up a plan and figuring out its types and possibilities.

After you are done listing the same, mitigate your risk according to the plan and assign a team member to take care of the same.

4. Determine the costs involved

Cost determination is one of the most crucial steps in the procurement management plan because it is directly linked with the project's budget. It is essential to estimate the cost based on the term of the project, scheduled dates, details of vendors' work arrangements, instrument proposals, and bids.

5. Establish criteria and workflow

The fifth step explains the importance of establishing the criteria and workflow of the different contracts. Before finalizing the process, it's pretty standard that it is vital to ensure the other elements like reviews proposals, analysis, and establishing the workflow.

The criteria represent on what basis you are selecting a particular stakeholder like vendors or suppliers. You can assign different kinds of contracts to other people or amend the same agreement.

It also helps to ensure the capability of the vendor to give the schedule and the quality products required by the organization.

6. Setup vendor management

Vendors are the key stakeholders responsible for the success of the procurement process. To ensure success, this step specifies strategies and protocols for managing the vendors.

Through this, the organization can ensure the vendors, their details, type of work, and expected timeline to deliver the goods.

The setting of vendor management also includes processes like invoices, status, and timesheets for better flow and responsiveness of the process.

7. Review and further approval processes

The review and approval process is the final and the last step of the procurement management plan. It provides an overview of the steps that are taken to acquire a particular product or service. It has detailed explanations as to what to be done and what not to be done.

Moreover, it also helps to ensure flexibility and changes in the plan based on the factors and changes happening in the environment.

By creating a procurement management plan, an organization can avoid sudden changes and surprises or last-moment considerations. It also ensures realistic project expectations and requirements that can be completed in the proposed timeline project.

Procurement Management Plan Template

Here's a sample to show what a procurement management plan looks like!

The plan includes the major headings like:

  1. Project name
  2. Project manager
  3. Date of starting the project
  4. Scope of project
  5. Project justification

Further added by,

  1. Description of the product or services
  2. Date of request
  3. Requested person's name
  4. Department
  5. Procurement method selected
  6. Action date
  7. Delivery date
  8. Final status
  9. Analysis

The Procurement Management Plan can be modified as per the project laid out by the organization and the business.

How Can Deskera help in creating a Procurement Management Plan?

A business has to keep track and record accounting books, inventory, and overall procurement management plan.. This can become difficult when done manually. This is why it is wise and vital to invest in software to make journal entries, maintain inventory records, and generally carrying out the procurement process smoothly.

Deskera Books is software that makes the entire procurement process more accessible. It helps in making journal entries. It helps in automating the process of entering sales and purchases into double-entry accounts. The software will help you save time by keeping a clean record of debits and credits in books. With the software, you get an uninterrupted, ready-made Balance Sheet, Profit and Loss Statement, and many other financial reports.

Deskera All In One

In other benefits, Deskera also provides software solutions for HR, attendance, payroll management, inventory management, and customer relationship management. Deskera People lets your employees mark and see their attendance, apply for a day off, and claim expenses with just one click online, among many features.

Deskera CRM allows the user to manage sales and support from one platform. From sales pipeline preparation to generating leads through email marketing, Deskera CRM assists with it all. It also records the opening rate and the click-through rates for email marketing.

Deskera Books

Deskera, in brief, is the software that helps you achieve a majority of your business goals. These goals are generating more leads, flawless record management systems, and effortlessly managing customers. It helps in providing a seamless digitized shopping experience to the customers. It also helps keep the employees and staff of the organization updated with their personal and professional records.

The software works on analytics to help the business identify the most common trouble the customers face. The software picks up the queries generated by the customers. These queries are then refined by the software to highlight the most common questions in the lot. The business then can rectify the trouble its customers are struggling with.

Key Takeaways

The article discusses everything related to the procurement management plan, the components, processes, and significant steps required to build an effective plan.

Following is a rundown list of the article highlighting the key takeaways:

  • A procurement management plan is a plan that defines the requirements of a particular project and lays down the steps required to get into the final contract.
  • A procurement management plan matters to the organization to save money, time and effort.
  • Overall, nine components build a procurement management plan—estimating, project scheduling, vendor control, roles and responsibilities, risk management, legal jurisdictions, payments, and constraints.
  • A procurement management plan performs five significant roles.
  • The process of setting a procurement management plan is based on nine components inclusive of the ten steps.
  • Creating a procurement management plan is based on seven steps, from clearly defining the roles and responsibilities to reviewing and approval processes.
  • Procurement management plan template for reference
  • How can describe help in creating a procurement management plan?


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