What is Procurement Planning?
Procurement planning is the process of identifying and consolidating requirements and determining the timeframes for their procurement with the aim of having them as and when they are required. A good procurement plan will describe the process of the identification and selection of suppliers/contractors/consultants.
Understanding Procurement Planning
Procurement planning is essential for businesses to minimize their purchase costs while maintaining their quality and quantity of goods standards.
A procurement plan is a process in which a company decides what they need, who will provide the products, and when orders will be fulfilled. Many departments within an organization are involved in the procurement team to aid in decision-making processes and maintain efficiency. A team member is assigned to each stage, such as the request proposal, vendor research, and approval process, to determine what procurement strategy best meets the business needs.
An adequate procurement management plan will identify and define realistic product expectations, such as fulfillment time, cost, and quality of products. In turn, this allows a company to recruit the required staff to optimize the efficiency of the procurement process. In doing so, a business can aim to reduce stock ordering and labor costs without sacrificing the quality of goods and services.
Importance of Procurement Planning
Procurement Planning is important because:
- It helps to decide what to buy, when and from what sources.
- It allows planners to determine if expectations are realistic; particularly the expectations of the requesting entities, which usually expect their requirements met on short notice and over a shorter period than the application of the corresponding procurement method allows.
- It is an opportunity for all stakeholders involved in the processes to meet in order to discuss particular procurement requirements. These stakeholders could be the requesting entity, end-users, procurement department, technical experts, and even vendors to give relevant inputs on specific requirements.
- It permits the creation of a procurement strategy for procuring each requirement that will be included in the procurement plan. Such strategy includes a market survey and determining the applicable procurement method given the requirement and the circumstances.
- Planners can estimate the time required to complete the procurement process and award contracts for each requirement. This is valuable information as it serves to confirm if the requirement can be fulfilled within the period expected, or required, by the requesting entity.
- The need for technical expertise to develop technical specifications and/or scope of work for certain requirements can be assessed, especially where in-house technical capacity is not available or is non-existent.
- Planners can assess the feasibility of combining or dividing procurement requirements into different contract packages.
- The Procurement Plan is the product of the procurement planning process. It can be developed for a particular requirement, a specific project, or for a number of requirements for one or many entities in the public or private sectors.