Procurement management, or the process of project procurement, is the systematic process of identifying and obtaining, through acquisition and purchasing, necessary services, goods, and works for your company.
The primary question in your procurement management plan will be:
What item (good, service) will my company purchase from an external supplier to meet the need and objective specific to my organisation and project?
Other questions will arise naturally thereafter but this is the leading thought.
Going to the source.
Once the primary question has been answered, a department will confirm its budget (often using project management or procurement software like Purchase Control) and begin the process in supply chain management known as sourcing.
The department responsible for procurement management will evaluate sources for obtaining the required goods or services. Sources and their products are differentiated through market analysis and supply chain logistics.
The modern view of the supply chain and global sourcing as integrated systems means that price negotiation is important but not everything. Negotiating prices and procuring the best quality good or service is objective but a rigorous process of bidding can mean procuring the relationship that is going to have the most long term effect on your project.
It’s all about relationships.
Bidding, or open competition between suppliers, is the basis for efficient procurement. Bidding solicitation, bidder qualifications, and performance evaluation of bids can markedly increase the success of your procurement management plan. This is often organised using supplier management software.
A procurement management plan often includes reports on competitive bidding opportunities. This step opens up the dialogue with suppliers who think they might fulfill the need of your company’s project.
Prequalification of bids, narrowing the bidding pool to more appropriately suit the needs of your company, is a simple way to increase the health and success of the procurement strategy. Prequalifications might include:
- size, type, and location of supplier
- timeline of project and availability of the supplier
- pricing and price adjustment policy of the supplier
- customer reviews, testimonials
Narrowing the bidding pool and establishing longer-term relationships allows your company to work closely with the supplier for the improvement and coordination of the project.
Viewing suppliers as collaborators means the goods and services provided have a direct impact on the intercompany relationship and so the supplier is more likely to take interest in the success of the project in order to continue the mutually beneficial relationship.
Sometimes offered by the bidder from other customers, or compiled after having worked with the supplier on a previous project, a report on the performance quality of the supplier is considered in the procurement management plan, as well.
Before signing the dotted line.
Contract planning, awarding and management are further steps in a project procurement plan. As mentioned above, in modern supply chain management collaboration is key. Clearly outlining the obligations, responsibilities, and performance goals is essential in the planning of a contract.
Some important considerations about a potential supplier include:
- interest in establishing a mutually beneficial agreement from the beginning
- the willingness and ability of the supplier to evolve and adapt with the project over time
- tone and posture of the supplier in bidding and contract negotiation
Is this someone I want to work with potentially for the next five years?
Considerations and questions will be specific to your company and project. Thinking critically in the bidding stage about what prequalification your project imposes on suppliers could make this step incidental.
Managing your project procurement plan.
Having insight into the life cycle of the project and evaluating the capacity for the supplier to grow and change with your company is a valuable asset for any procurement manager to have.
Online procurement software like Purchase Control help with procurement flow and status. The automated processes in our bookkeeping software free up your procurement management team to focus on the actual process of procurement rather than the administration of unnecessary paperwork.