Jul 11, 2024
How to Write a Simple Procurement Plan + Template
Master your procurement with this procurement plan template.
The more smoothly you can move goods and materials from the supplier to your sites, the more efficient your operations become. However, Amazon found that 95% of procurement decision-makers feel there could be optimizations in their systems. One of the problems is that there are many vendors to choose from, but it is not always easy to find the right one. The same survey reported that 85% of respondents couldn’t meet their sustainability goals because they had trouble finding suppliers whose practices would help them meet their targets.
One way to improve this process is to create an effective procurement plan.
Benefits of a procurement plan
The process of planning helps you streamline your thinking over what your company needs, who will supply the materials you require, when they will arrive and in what quantities. It involves research, data analysis, requests for proposals (RFP), standards for quality, cost and other essential information. And you can achieve this using a simple procurement plan template.
As a result, you will enjoy:
Reduced costs without compromising quality by identifying the best suppliers with the most attractive pricing.
Better time management by reducing delays and working with reliable vendors.
Improved risk management thanks to the opportunity to take an overview of the entire procurement process during the creation of the plan.
Better relationships with suppliers by opening lines of communication.
Compliance with relevant laws and regulations thanks to the detailed input that goes into creating the procurement plan.
This article explains what you should include in your procurement plan, provides a simple template for you to use and takes you step-by-step through how to create a plan that works.
Components of a procurement plan
Project details and document control
Basic information about the project: official name and reference number.
Standards for naming, updating, and storing documents related to the project.
Procurement process
Steps to identify requirements, get quotes, compare vendors, and finalize decisions before signing off.
Contract types
Types of procurement contracts to be used in the process.
Procurement risks
Create a risk matrix to understand and rank risks by likelihood and impact.
Address the most likely and impactful risks first.
Procurement milestones
Key dates for the process, such as sending requests for quotations (RFQ) and completing vendor evaluations.
Integration of procurement activities
How the chosen supplier will work with your organization.
Details on documentation access, collaboration, and shared risk management.
Decision criteria
Define what makes a successful bid from a vendor.
Criteria might include lowest prices, quick delivery, open communication, etc.
Procurement KPIs
Create key performance indicators (KPIs) to measure the success of the procurement plan.
Metrics might include on-time delivery rates, returns rate, accuracy of quantities ordered and delivered, etc.
Stakeholders
Identify who is responsible for each stage of the process and their authority over decision-making and sign-off.
Assumptions and constraints
Assumptions might include suppliers meeting regulatory requirements and stakeholder support.
Constraints might include milestone timing and maintaining a fixed budget.
Legal jurisdiction and currency
Specify the jurisdiction’s rules and the currency for agreed fees.
Cost estimates
Explain the process for estimating costs, including whether it will be done internally or externally and the methodology used.
Prequalified sellers
List vendors previously met requirements to engage them again for quotes on the project.
Download simple procurement plan template
How to create a simple procurement plan template
1. Identify your needs
As with any plan, it is essential to identify the ideal outcome of the project. This means identifying which items you need, in what quantity, where you need them and when. The information you note down on the plan will help you create your RFQ or RFP and illustrate to potential vendors what the project entails. As a result, they will be able to more accurately set out how they will help you achieve your aims.
Make sure you include information about the urgency and importance of receiving the materials in question, as this will also dictate the correct procurement process to help you fulfill these aims.
2. Manage project details
The main element of your plan should include the project details that provide the framework for how you will run the process.
Include the format of the contracts you will provide for vendors, opting for the best option for your business and the project at hand. Common contract types include:
Fixed price, which clearly defines the roles and responsibilities, as well as exactly how much the buyer will pay.
Cost-reimbursable, where the vendor invoices for direct and indirect costs after delivery.
Time-and-materials contracts, where the vendor works closely with the buyer, being paid for their time and goods supplied as the contract runs on.
You should also describe the process for working with the vendor, which could involve using a collaborative supply chain tool like Beebolt where you can share access to relevant documentation in the cloud and communicate directly.
Assign roles and responsibilities within the project and outline the structure of the procurement process. List the milestones you must meet to help stakeholders know the dates they are working to and when they must have completed set tasks.
Have your costs estimated independently so as to gain a better understanding of the limitations of the project and ensure there are tools in place to maintain control over the finances. This will help you understand the value of the quotes you receive from potential suppliers, eliminating unrealistic ones.
Consult with internal stakeholders to set KPIs for the project that will help you create the most efficient and effective process. This can include metrics such as:
Perfect order rate
Order fulfillment cycle time
Supply chain cost per unit
Return reason analysis
Supplier order accuracy.
3. Manage risk
Any procurement process comes with risks and you should be sure to identify and mitigate them in the planning stage. Consider each risk in order, using your risk matrix.
Common potential risks include:
Budget restraints limiting the number of potential vendors
A faulty needs assessment that could lead to procuring the wrong goods
Inaccurate supplier market analysis, leading to missing out on potential suppliers
Personal biases within the selection criteria, which can affect the decision-making process.
Ensure that you have a plan to mitigate these risks and tackle them in order of severity.
Also, take into account how you will work with suppliers to meet regulatory requirements. Think about the relevant legislation in the regions in which you work and how the nature of your business might be affected. An example is the reporting requirements on organizations whose supply chains contain the movement of conflict minerals, with the EU and US both having laws in place to regulate this type of trade.
4. Supplier selection
You might consider sending a Request for Information (RFI) to research suppliers initially. From then, an RFQ for simple projects or an RFP for more complex projects will help you communicate your needs to vendors and allow them to let you know how they intend to meet your requirements.
You can also invite qualified vendors to pitch, with the potential for a better deal from those with whom you have worked before and who understand your processes and procedures from experience.
When you receive responses from vendors, use your success criteria to compare the bids and select the seller who you believe is the best fit.
5. Contract negotiation and purchase order
Once you have a preferred supplier, you must negotiate a contract that will deliver the goods when they are needed. Include the key procurement dates within the contract so they are set in stone with a purchasing strategy that suits both parties. You should negotiate terms, such as the expected quality of the materials, acceptable levels of returns and other clauses that ensure the vendor delivers on your requirements.
Once this is agreed, raise the purchase order with the expected costs allocated accordingly, issue it to the supplier and confirm the details for the project to begin.
FAQ
What is the most critical component of a procurement plan?
The project details set the framework for the plan and are essential to get right at the start of procurement management plans. This creates a procurement strategy that will affect the rest of the process. It helps all stakeholders understand what the goal of the project is so they can work toward it more effectively.
How often should a procurement plan be reviewed and updated?
Review the plan every year at least, updating it if necessary. You should also look at how it is structured if your projects start to fall short or there is a change in market conditions or in your operational objectives, for example.
Conclusion
Using our simple procurement plan template, you can streamline your processes to find the right vendors for your organization more easily. It encourages companies to think systematically about their requirements, goals and resources to help you formulate a better procedure.