Question & Answer: How would you apply project procurement management?…..

All organizations deal with this form of management at some point in the life of their businesses. It is in the way the procurement is carried out and the planning of the process that will ensure the things run smoothly.

But with many other management techniques in use, is there any special reason to use this particular form of management to acquire goods and services? Yes, this is one of the frequent questions asked regarding procurement management.

Procurement management is known to help an organization to save much of the money spent when purchasing goods and services from outside. It also has several other advantages.

The procurement process includes five major steps, as follows:

• Specification. This step involves the purchasing department in communicating with the project manager to develop and approve a list of procurement items necessary for project implementation. The department must specify the approved items to external vendors.
• Selection. This step of the project procurement process requires the department to find potential suppliers which can procure the necessary items, according to the specifications. For this purpose the department needs to set vendor selection criteria, which may include such measures as Delivery, Service Quality, Cost, and Part Performance.
• Contracting. The department must communicate with the suppliers on delivery dates and payment conditions in order to ensure “on-time” delivery of the ordered items within the stated project budget. All the conditions should be listed in a procurement contract. Also a detailed delivery schedule should be negotiated with the procurers and approved by the purchasing department.
• Control. Success of the procurement management process depends on how the purchasing department controls the delivery and payment processes. Through arranging regular meetings with the vendors, tracking delivery progress, reviewing the ordered items against the approved product specifications, and making necessary changes to the procurement contract, the department can control the process and ensure successful accomplishment.
• Measurement. The final step of the project procurement management process refers to using a system of performance indicators and measures for assessing the effectiveness and success of the entire process. The project manager needs to set up such a system and the purchasing department needs to use it in measuring the process. Special meetings and workshops can be conducted to view KPIs, intermediate results of staged delivery, performance of procurers, adherence to product specifications, communications with suppliers, and the like. In case any deviations or gaps are revealed the department should notify the project manager and make necessary changes to the procurement plan.

Project Procurement Plan

Planning of project procurements is carried out within the procurement process and results in developing a plan. A procurement plan is a convenient tool for organizing and managing activities and tasks related to the procurement management process. A template of the plan is to be designed by the purchasing department in cooperation with the project manager. A project procurement plan should be reviewed and approved by the project manager before any supplier relationships get started.

A project procurement plan template documents:

• Deliverables to be procured by proposed agreements/contracts.
• Effective resource management strategies for negotiating and managing the agreements/contracts.
• The need for staged delivery and desirability of testing the procured items before introducing them into the implementation process (this item is optional).
• The chosen procurement method (payments, expressions of interest, request for price/quote, request for tender).
• Key stages of the process for selecting suppliers and vendors.
• The model of procurement funding.
• The sample of procurement contract/agreement.
• References to quality approvals, quality assurance and risk management

How Does Procurement Management Works?

Following are the four main working areas of concerns when it comes to procurement management. The following points should be considered whenever procurement process is involved:

• Not all goods and services that a business requires need to be purchased from outside. It is for this reason that it is very essential to weigh the pros and cons of purchasing or renting these goods and services from outside.

  You would need to ask yourself whether it would in the long run be cost-effective and whether it is absolutely necessary.

• You would need to have a good idea of what you exactly require and then go on to consider various options and alternatives. Although there may be several suppliers, who provide the same goods and services, careful research would show you whom of these suppliers will give you the best deal for your organization.

  You can definitely call for some kind of bidding for your requirement by these vendors and use a selection criterion to select the best provider.

• The next step typically would be to call for bids. During this stage, the different suppliers will provide you with quotes.

  This stage is similar to that of choosing projects, as you would need to consider different criteria, apart from just the cost, to finally decide on which supplier you would want to go with.

• After the evaluation process, you would be able to select the best supplier. You would then need to move on to the step of discussing what should go into the contract. Remember to mention all financing terms how you wish to make the payments, and so on, so as to prevent any confusion arising later on, as this contract will be binding.

  Always remember that it is of utmost importance to maintain a good relationship with the supplier. This includes coming up with an agreement that both would find satisfactory. This helps the sustainability of your business as well as the supplier’s business.

These four simple steps would help you acquire your goods easily and quickly without much hassle, but always requires careful consideration at each stage.

Making the Process Work Efficiently:

In order to ensure that everything goes well through to the end, you would have to keep track of the progress of the procurement. This would mean that you should keep checking on the suppliers in order to ensure that they are abiding by the terms of the contract and will be able to supply you with the goods and services by the deadline.

Should there be any discrepancies or any issues, you should always let the supplier know by means of the method of communication decided on at the time of making the contract.

The organization must always be willing and open to change. This is in respect of all changes required in order to ensure the efficiency of the process. These changes could be in the form of technological advancements and even changes to the workforce, among other changes.

In terms of technology, any new equipment and machinery required to handle these goods may need to be purchased.

Similarly, with regard to the workforce, you would need to employ workers, who are highly skilled and trained when it comes to dealing directly with suppliers.

It is always best for an organization to have different teams within who are specialized in different fields. This would make procurement management even easier. Each team could then deal with the relevant areas of buying and will also have the expertise required. For example, those who have experience buying machinery may not have the same skill when it comes to getting particular services from another organization.

Conclusion

It should be kept in mind, however, that this procurement management system must run efficiently and smoothly for all benefits to be reaped. The key to this would therefore be an efficient system as well as the right supplier and resources.

For the purpose of procurement management, there should be a team of highly trained individuals, if procurement management plays a key role.

As an example, a hospital should have a dedicated procurement team and should employ strong procurement management techniques and tools.