Project procurement management plays a key role when it comes to delivering a quality project on time and within the expected budget.
Poorly executed project procurement management causes headaches all around. Time is wasted while the whole team waits for missing materials. Deadlines come and go. Costs spiral out of control as materials are purchased last minute from random suppliers.
For the project manager, mismanaged procurement is a real nightmare. If the data needed to make important decisions is buried in old emails, he or she may be forced to make decisions blindly. If the process isn't streamlined on one simple platform, communication with team members and suppliers can easily get lost or mixed up.
This article will offer you a simplified tutorial intended to help you start planning your project's procurement. It will provide you with the steps you should take to ensure on-time deliveries, keep costs under control and monitor processes.
For the sake of this tutorial, let's say your company needs a simple outdoor warehouse: foundation, four walls, door, windows, and roof. The project plan is outlined in the image below. Each subproject can only begin once the previous subproject has been completed - e.g., you can only put on the roof once the walls have gone up.
Also, let’s assume you need to procure specific building contractors (i.e., someone to lay cement, a carpenter for the door and window frames, a roofer for shingling the roof, etc.) along with all the building materials for each subproject. In addition, you need the shed to be completed in time to receive your next shipment of inventory.
Because time is critical, all materials and services should be pre-procured before starting the next subproject. For example, the contract with the roofers should be signed and the shingles purchased before the walls are complete.
In order for the project manager to maintain complete control over the project and procure the necessary materials and services within specified time limit and budget, it's best to follow these simple project procurement management principles.
Planning is key.
It’s essential to prepare a detailed procurement plan since the procurement cycle for most goods and services may take months. Futhermore, there may be delays outside of your control. Lousy preparation and no procurement plan may also result in the entire team waiting for the missing goods or services and wasting valuable time.
The simple steps described below can help you avoid finding yourself in a situation like this.
Four Steps for Successful Project Procurement Management
When initiating your procurement management plan, it’s wise to have estimates for the time it takes to procure specific products and services. You should also keep the overall costs in mind when preparing an estimated project budget.
Make sure you have all the necessary information you need to make smart decisions, like how much time it might take to complete the procurement for each subcategory or what the expected costs are. If any of this information is missing, consider contacting a potential supplier who might be willing to provide you with possible time and cost estimates.
An initial project procurement plan for our example warehouse can be seen below. Notice how it includes both the estimated time frame as well as the estimated cost for each subproject.
Now it's time to prepare a thorough procurement management plan.
For example, on average it might take two weeks to request for proposals. However, if the first round fails, the request has to be run again. In all, it might take one month.Therefore, all procurement should be carefully planned.
How to create a thorough procurement plan
- List the items needed for each project. Excel is the perfect tool for that.
- Estimate the dates each item is needed and add this information in the next column.
- Estimate how long it will take to procure each item. (Request for proposals + signing contract)
Its smart to plan a minimum of two rounds to request for proposals since the first round might fail.
- Once you know the date each item is needed and how long it takes to procure it, you can estimate when to start procurement.
The table below depicts the procurement plan for all materials and services needed to build the roof.
All the goods and services should be available by day X, which is the walls are put up.
During the planning phase of project procurement management, you should also look for potential suppliers for each item.
Potential suppliers can be easily found online. Aim for about 10 suppliers for each product or service.
Once the list is ready, you can start executing the plan.
For the execution phase, you'll need to use the project procurement management plan you created in Excel. This plan let's you know when to start procuring each of item on the list. In our warehouse example, the procurement cycle for roofing contractors needs to begin five weeks before the walls go up. Your Excel list should already contain contact information for potential suppliers as well.
Requesting for proposals and getting the best price
Procuring goods and services starts by requesting proposals from the suppliers.
Once you receive the suppliers' bids, choose the best provider and sign the contracts.
By using the same process for each item listed in your plan, you'll be sure to get the best price. Be wary of taking shortcuts during the procurement process. Doing so could result in paying higher prices or jeopardizing relationships with trusted suppliers.
The entire process needs to be monitored in order to determine whether the received bids fit within the estimated budget and in order to ensure that all the goods and services are procured on time.
The monitoring phase is essential to completing the project according to plan.
The person responsible for executing the project should always have a clear understanding of how items are being procured. He or she also needs to know if the materials and services have been obtained at prices within the project's budget and whether or not deadlines have been met. Unexpected delays and costs are normal, but the project manager must be able to make important decisions quickly in order to minimize their effect.
As seen in the image below, the project manager should know whether all the products and services needed to build the roof have been procured and whether the costs were lower than expected. If the procurement plan has been properly prepared and executed, the walls can be put up as soon as the foundation is ready.
Now, these steps are easy enough to follow if you're involved in the project from the beginning. However, if you're joining a project that's already well under way, here's how you can demonstrate value to a skeptical team.
Once you have established the team's needs and organized your procurement process for the project, you'll have to provide periodic updates to the project manager. Sifting through emails to find necessary data is time consuming, yet without this information, the project manager is going to have trouble effectively monitoring the budget and timeline.
Luckily, there are online solutions, like procurement management software DeltaBid, which give you a clear overview of the entire procurement process, from costs to deadlines, in an easy-to-use dashboard. DeltaBid can save you time, keep the project costs under control, and help you stay organized.
For more information, just start free trial HERE