The most effective procurement teams develop a blueprint for buying before diving into the purchasing process.
This process — procurement planning — helps purchasing teams develop a thorough understanding of stakeholder requirements, analyze risks, and reduce procurement costs.
Find out what’s involved in procurement planning, and learn the ten steps to take to write a successful procurement plan.
Procurement planning is a strategic process that occurs before procurement itself begins. In the planning process, the procurement team and key stakeholders clarify business needs and justify the requirement for an external supplier.
During the procurement planning process, the team and stakeholders also discuss and record:
The outcome of this process is the procurement plan, a master document that serves as the blueprint for purchasing as the procurement team and key stakeholders move forward with the procurement process.
A good procurement management plan includes:
Start by detailing the steps to acquire the product or service in question.
For instance, the steps might look like this:
This step is critical for ensuring team members don’t rush to completion and skip stages, like jumping into vendor discussion before completing a make-or-buy analysis.
Every procurement process looks slightly different. Learn more about designing a process that makes sense for your organization with our guide, How to build a procurement process at any stage of growth.
Detail the exact products or services needed and any specific requirements for them.
Say the business is looking for a financial modeling software platform. They might specifically require that the tool offers scenario analysis as a feature. Include this in the description of requirements.
Here’s an example of what that might look like.
In this section of the procurement plan, identify the team members working on the procurement project and any stakeholders who its completion will impact.
Aside from members of the sourcing and procurement team, this may also include:
Detail the tasks each person is responsible for, like this:
Assigning roles and responsibilities early on ensures tasks don’t slip through the cracks because everyone thought someone else was handling them.
Most pricing for software contracts falls into one of three categories:
Determining the type of contract up front helps the vendor selection process. For instance, some vendors may be unwilling to engage in a cost reimbursement agreement, as they have to foot the bill for expenses upfront.
Lay out key dates, milestones, and timeline expectations for procurement. Gantt charts are a popular way of visualizing this information.
For example, assign dates for the following milestones in the procurement process:
Putting these dates in stone helps keep the procurement team on track and prevents timelines from creeping out.
By what criteria will vendor bids be judged? Beyond price, factors to assess may include:
Identifying selection criteria before beginning conversations with vendors helps ensure the decision is objective and allows multiple project team members to analyze vendors individually.
In this section, detail how the team will handle changes to the procurement plan if required.
For example, if the market analysis identifies that one of the required features is outside the budget, either the budget or the need for that function must be reassessed.
Use this section to explain how to manage that change, who is responsible for making changes, and how those adjustments should be communicated to key stakeholders.
When the procurement process is complete, the vendor management plan kicks off, so it’s a good idea to have an outline of this prepped during the procurement planning phase.
This section should outline the techniques to use to manage vendor relationships, including:
Outlining this information before beginning the procurement process helps set clear expectations with vendors, so they know what to expect from the supplier management team if a partnership is created.
All vendor relationships come with some degree of risk, be it financial, operational, or security risk.
The procurement plan should detail how to identify and mitigate risk.
Learn more about the different kinds of vendor risk and how to manage them in our guide, Vendor risk management: What to watch for and best practices.
The last step of the procurement planning process is detailing the expected budget for the deliverables, as well as ideal payment terms and methods.
Also note which factors are negotiable and which are not. For instance, it might be non-negotiable to pay via direct credit, as finance policies prohibit company card purchases above a certain dollar amount.
However, different pay structures may work, for instance, monthly, quarterly, or annual billing.
Procurement planning is only the beginning.
Once a solid plan is drafted, the procurement life cycle itself begins. That means initiating vendor conversations, assessing and comparing bids, and negotiating favorable agreement terms.
For SaaS buying, Vendr is a secret weapon for reducing costs and driving procurement efficiency.
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