The initial stage of the procurement process is the creation of a procurement plan that establishes a timetable of what items are to be procured and when , based upon the budget of your department. It serves as a guideline element for the procurement team to keep their focus on meeting deadlines and prevents them from spending too much by any means. If executed properly there are many advantages to planning your procurement that include the time savings and savings on tools like fuel cards. Below, we’ve outlined the top five benefits of planning your procurement, to help you understand why you need a plan and how beneficial it can be for your procurement department.
Benefits of Procurement Planning
1. Cost Reduction
One of the most admired advantages of planning for procurement is the reduction in cost that can be derived by strategically sourcing goods and deciding who to source these items from as part of the plan for procurement. When you use the planning time to discuss with suppliers and also having the benefit of not being confined to a strict date, it’s much simpler to talk about price and possibly decrease the price of goods. If you’re working with the time frame that is rapidly approaching, you’re on in a disadvantage. On the other hand, during the process of obtaining estimates, you’ll can benefit from looking at prices against other providers and market rates with no pressure on your shoulders.
Tips: Make sure to be in touch with other departments throughout the process of planning. Simple tasks such as asking them to conduct an inventory-taking of office supplies can help you allocate your budget and cut costs efficiently during the planning phase.
2. Extra Resourcing
Effective procurement planning ensures that you’re thinking about all aspects of what your department requires in order for the operation to be run efficiently. Certain projects or certain times might require more resources If you plan this out from the beginning, you’ll be able to decide the time of the year that this period is appropriate and then consider it in your budget. For example, if , for instance, you are employed in fleet procurement or the haulage business and you are aware that you’ll require additional vehicles in a time of high demand and you know you could also need additional fuel cards for haulage drivers.
Knowing when your peak times are, and planning ahead to be prepared for them can help your fuel card company an understanding of your spending profile. An alert that you may need more cards will help ensure that they can be handed out and distributed on the right time to save energy and cash.
3. Transparency
Since the plan is made for everyone to read and know about this creates total transparency in the procurement process. Should, at any time something go wrong the plan is a great base to revisit and come up with a solution. In addition, should anything happen to go wrong when a plan is in place , no other items should be affected since a clearly defined procedure for the acquisition of everything is clearly laid out, and doesn’t need to create ripple effects all over the board.
Tips: Remember that your plan doesn’t have to be set in stone. A certain amount of flexibility must be allowed for unexpected changes that may occur outside your control. Although you’ve already decided on the suppliers you’ll work with Market research must be conducted all through the year. Based on the results of this research, be ready to modify your plan to accommodate any changes in suppliers or price reductions that are negociated.
4. Planning Vs. Performance
Though planning is often the beginning phase of the procurement process one of the advantages of planning for procurement is the ability to use it to evaluate every step and as a method of studying the performance of your organization. Utilizing the plan as the basis for evaluating performance it, you will be able to identify any reasons why you are not meeting targets, and then determine if changes have to be made to the plan later on the timeline. If you’re in management or in charge of the department, this can be an excellent tool to use in appraisals, or giving constructive feedback you think is necessary.
Tips: Ensure that any changes made to your plan are recorded precisely, and include an explanation of the reasons for the changes, and the correct dates that correspond to the actions. A 100% accuracy is essential to accurately track performance data to be able to reuse and reference this information.
5. Future Strategy Development
Effective procurement planning essential to measure performance in real time and analyzing, but it can be very useful in creating and perfecting a successful procurement model or strategy that can be reused and modified for different projects or plans for the future. Once you have measured the results, further analysis can be conducted to determine what methods work and those that require further improvement and paving the way for an effective plan to be developed basing it on actual evidence of what has performed.
Tips: When creating your strategy, make sure to be sure to reference the procurement plans of your predecessors when you can. There are likely to be patterns or methods which are in line or combined with your current plans to improve the strategy.
The benefits of procurement planning influence the future actions of the department, and future actions that are in the near or distant future, which makes planning an integral part of the process of procurement. Planning is only one piece of the equation to have a successful purchase. To learn more about the other areas to be taken into consideration for successful procurement Please read our entire guide.