Embedded Files
Tools and Techniques for Planning Procurement Management
What is Procurement?
Before we get into understanding the various tools and techniques to assist for planning procurement management, understanding what procurement is will help our overall understanding of the processes involved. Procurement means acquiring goods and services from an outside source. This term is used widely by many types of people. In IT, the term outsourcing is used. An organization or individual that provides procurement services is called a supplier, vendor, contractor, subcontractor, or vendor. Of these terms, the supplier is the most widely used. The Project Management Institute defines an outside source as a source outside the project team, so the same organization can be a supplier to the project team, or the project team can be a supplier to another group in the organization.
Introduction to Project Procurement Management
Project Procurement Management includes the process required to obtain a project's goods and services from outside the Executive organization. The organization may be either a purchaser or seller of a product or service under a contract or other arrangement. On the top of the blog, we have an image that depicts the Project Procurement Process. The three main processes of project procurement management are:
Planning procurement management involves deciding what to buy, when and how to buy it.
Conducting procurements includes obtaining seller responses, selecting sellers, and awarding contracts.
Controlling procurements Includes managing relationships with sellers, monitoring the performance of contracts, making changes, and concluding contracts.
Agile and Procurement
Agile needs the right mindset and technology to make outsourcing more efficient and enable companies to repetitively and collaboratively accelerate time to market. Agile procurement is a procurement methodology that employs elements of an agile approach to software development. The core concept of agile approach is to work in small, quick steps that give you flexibility in the process. Therefore, agile procurement is an open, collaborative, less rigorous approach. Organizations that implement agile procurement are able to benefit from a quicker procurement process that prioritizes building relationships with key strategic partners.
Introduction to Planning Procurement Management
Procurement planning involves deciding which project requirements can be best met using external products or services. This includes deciding whether to procure, how to procure, what to procure, how much to procure, and when to procure. An important outcome of this process is whether an organization manufactures certain products and provides certain services within the organization, or whether those products and services should be obtained from an external company.
The main advantage of this project management process is that it helps the project manager decide if the project should receive external assistance. It also helps you determine what resources you are getting, how to get them, when to get them, and how much you need to complete your project. If you do not have a product or service to purchase from outside your organization, no additional procurement management is required. The inputs required for procurement planning include organizational process assets such as project orders, business documents, project management plans, project documents, corporate environmental factors, and contract types.
The Different Tools and Techniques
There are a wide range of tools and techniques that can be used by the project manager and their team to assist them in the overall process of planning procurement management including:
Make-or-Buy Analysis:
Make-or-buy analysis is a common management technique used by an organization to determine whether to manufacture a product, provide services within the organization, or purchase it from someone else. This form of analysis estimates the internal cost of providing a product or service and compares that estimate to the cost of outsourcing. A common make-or-buy decision is to determine whether a company should develop an application themselves or purchase software from an outside source and customize it to the company’s needs. Many companies also use make-or-buy analysis to decide whether to buy or lease items for a project.
Expert Judgement:
Experts inside and outside the organization can provide excellent advice when planning an acquisition. As part of good business practices, project teams often need to consult with experts within the organization. In-house professionals may also know that most of our competitors outsource this type of work and who are qualified external suppliers. Outsourcing contracts are legal arrangements, so it is also important to consult a legal expert. Expert judgment is useful in many procurement decisions, both internally and externally.
Market Research:
Market research is very important when planning your procurement. Project teams need to choose their suppliers carefully, as many potential suppliers often have access to their products and services. Some companies have a list of preferred suppliers and more information about them. Much information is also available online and there are many meetings where participants can see and discuss new products.
Project Manager’s Role
Project managers are involved in procurement, as well as in other aspects of the project management process. However, this is a process that may not have the same permissions as the rest of the project. The project manager has the authority to enter into a contract with a contractor on behalf of the company, but the project manager is often not the person who manages this contract after it has been signed. However, it is crucial for the project manager to be up to date. The project manager however, is heavily involved in the planning procurement stage. This is because they have and are most familiar with the requirements of the project and the overall expectations and guidelines of the project. A planning contract is the creation of required product or service requirements. This includes companies that provide those products or services. Then request a seller's response by narrowing down the company to a small number and then selecting a seller who is usually left to the purchasing department. All in all, understanding what procurement is and the different approaches and steps to procurement management is crucial for the project manager’s role.
Sources
Textbook: Chapter 12: Project Procurement Management
https://www.fairmarkit.com/glossary/agile-procurement
https://www.projectmanager.com/blog/project-procurement-management-quick-guide
https://project-management-knowledge.com/definitions/p/plan-procurement-management/
Page updated
Report abuse