How to Create a Procurement Plan and How to Manage it.

One of the key aspects of procurement is planning. Poor planning or no planning at all leaves, not only the the procurement department, but also the finance and budgeting in disarray. Thus, every procurement department should have a procurement plan, aka, a contract management plan.

How you create a procurement plan depends on the structure of the department. How many procurement employees do you have? Are they each responsible for a certain category, or are the responsible for different departments/divisions within the company? My personal experience, I’ve always been responsible for multiple departments, so this article will focus on that angle.

For starters, it’s recommended you have a contract management software. This helps making a plan ten times easier. However, if you’re condemned to a life of suffering and are stuck with an old fashioned spreadsheet, here are some tips to make life a bit easier.

At a minimum your procurement plan should track the following categories:

1: User Department and the specific Project Manager,

2: Contract Start Date,

3: End date of the initial term,

4: Annual price (this includes pricing for option years),

5: Change Orders.

6: Option Years (if any),

7: The Vendor, and

8: Historical Data. (More on that later).

Once you identify these categories, I personally recommend creating a sheet or table for each department. If you don’t have a contract management system, set reminders in your and the department calendars of when the contract end date is. I would also place an alert on the PM’s calendar if you’re able to. The calendars should alert you at a minimum of 90 days ahead of expiration date. The same with automated alerts from software, the contract management software should send an email to you and the PM 90 days ahead of expiration date.

Doing all of this allows you to keep your contracts organized and you’re better able to serve each department.

Now for historical data. What kind of data are we tracking? It is important to note that this information should be tracked on a separate sheet/s within the specific contract file.

1: Implementation time: Look back to when you first created the contract. How long did it take to implement the software or whatever it is. How long did it take for your company to be able to fully utilize what the vendor provides?

2: Vendor performance: Has the vendor been delivering what is expected at the quality needed? Are they responsive when you need them?

3: Customer complaints: Has the PM made any complaints? What about other businesses who have dealt with the vendor?

4: Contract disputes: Are you constantly arguing over language of the contract? Are the disputes minor, complex, etc.?

Tracking all of the information laid out in this article will help your company make better business decisions. And it will help you be of better service to your customer. Remember, the #1 goal is to provide excellent customer service. This information will tell you how far in advance of the expiration date you should begin taking action should you want to replace the vendor, it’ll give you some idea of what replacing the vendor will cost, and among other things, whether you should replace the vendor at all.

Finally, all of will give you an idea of how to manage specific contracts, a topic which I will cover in my next article.