Procurement Management Plan: What Is It, Best Practices, and Steps To Create It

How to Create Your Own Procurement Management Plan

Procurement management plans contain a lot of information, but it doesn’t have to be overwhelming. Follow the steps below to craft your own procurement management plan.

1. Define What Will Be Procured.
   For every good or service that will be procured, define the item (or service) type, quality, and quantity.

   Include the benefits provided by each purchase and why it’s important for success. If required, include all relevant technical specifications.

2. Define Timelines.
   Write out a timeline for each good or service. Specify when it will be ordered, its delivery date, and when it will be used.

   For repeatable purchases, you can also define a timeline of when you will need to purchase more.

3. Establish Approval Workflows.
   Write a list of who is authorized to purchase each item, the people required to sign off on purchases within a defined price or quantity threshold, and anyone in management who’s required to approve changes in project scope or budget.

   This will ensure approvals continue even when one or more approvers are out.

4. Select Contract Types.
   Decide on a contract type (e.g., fixed price, cost reimbursement/cost-plus, time and materials, etc.) for each supplier.

   Contract types vary in structure and will be different depending on your needs. The contract type will be based on cost specifics, billing rates, material costs, and any additional fees.

5. Perform Contract Management.
   Outline the contract management details including software selection and requirements (eSignatures, digital approvals, etc.), and finalized document management after contract closure (e.g., storage and access).

   These specifications should also include other procurement documentation beyond contracts, including purchase orders, RFPs, etc.

6. Identify Potential Risks.
   No matter what your industry or vertical, every line of business carries risk. Risks for procurement can include, but aren’t limited to:
   • Shipping delays
   • Unrealistic cost models and timeframes
   • Vendor capacity and performance problems
   • Relationship conflicts between or with suppliers

7. Perform Risk Mitigation.
   Make a plan to address each potential risk with contingencies and alternative sourcing.

   

   Risk mitigation examples include:

   • Backup suppliers for critical items.
   • Alternative timeframes and shipping options to combat delays.
   • A list of team members authorized to address both specified and unspecified risks.

8. Establish Cost Specifics (and Submit RFP).
   Whether it be for project procurement or general procurement, it’s important to establish a detailed list of all costs. Using this list, procurement teams may want to issue a request for proposal (RFP) to potential vendors.

   The RFP (also called a request for quote, or RFQ) describes the project in detail. Vendors reply with the goods and services they propose to provide, how they will provide them, timeframes (including delivery dates), and an itemized list of costs.

9. Specify Document Particulars.
   List the specific templates and document formats that will be used. Standardized documents ensure compliance, encourage consistency of documentation, and facilitate effective communication between parties.

   Using a cloud-based contract management platform (part of procurement software) lets you create contracts faster from pre-approved templates.

   These can also be easily received, reviewed, and signed electronically by vendors. They’re securely stored in the cloud for easy retrieval and modification while following compliance management

10. Identify Procurement Constraints.
    Anticipating potential snags can help you avoid disaster. If factors such as timeframe, cost, scope, production resources, material, or quality have any potential issues or limiting factors, highlight that from the beginning.

    This will set proper expectations and prioritizations as the project moves forward, and ensure everyone is operating within the limits you’ve set.

11. Outline Decision Criteria.
    Determine which criteria you will use to select the best suppliers for your needs. The limits you set in step 10 will inform these criteria and ensure suppliers are on the same page.

    Examples include a vendor’s reliability, performance history, and compliance track record.

12. Make a Vendor Management Plan.
    Schedule regular meetings to discuss your vendor’s performance and benchmarks. These can be daily, weekly, monthly, or quarterly meetings.

    Always have open lines of communication with key stakeholders at each vendor you rely on. Use your procurement KPIs to get real-time feedback on how vendors are performing and adjust as required.

    Procurement software can greatly simplify vendor management. It allows you to compare current and past performance and identify opportunities to streamline or expand your vendor list based on sub-par or exceptional performance.