Five Advantages of Effective Procurement Planning
Originally uploaded on July 03, 2020
Why is Procurement Planning Important?
The first stage of the procurement cycle is a procurement plan, which determines a timeline of what items will be procured and when based on the department's budget. It acts as a guiding pillar for any procurement team, keeping them on track to meet deadlines and from overspending in any way. If done effectively, there can be many benefits of procurement planning. Below, we have explained the top 5 advantages of procurement planning to help you appreciate why a plan is needed, and how advantageous it can be for any procurement department.
Advantages of Procurement Planning:
1. Cost Reduction
One of the most appreciated benefits of procurement planning is the cost reduction that can occur from strategically sourcing products, and deciding which suppliers to get them from as part of the procurement plan. By using the planning time to negotiate with suppliers, and having the luxury of not working to a tight deadline, it can mean it is much easier to discuss price and potentially reduce the cost of items. When you are working within a time-frame that is fast approaching, you are the back foot. In contrast, during the process of getting quotes, you have the upper hand, comparing prices against other suppliers and the market rate without as much pressure hanging over you.
Tip: Be sure to check- in with other departments during the planning process. Simple tasks like asking them to perform a stock-take on office supplies could help you dedicate spend and reduce projected costs more effectively during the planning stage.
2. Extra Resourcing
Effective procurement planning means that you are considering every aspect of what the department needs in order for the operations to run smoothly. Some projects or particular periods may require extra resource, by planning this at the beginning, you can determine when that period is, and consider it within your budget. For example, if you work within fleet procurement, or within the haulage industry and you know that you will require extra vehicles during a peak period, you'll know that you may also require extra haulage fuels cards for these drivers.
Knowing when your peak periods are and planning ahead for them, can give your fuel card provider a better idea of your fuel spend profile. A heads up that you may require more cards will ensure they can be delivered and distributed in time to save valuable time and money.
You can find out more about fuel cards and the benefits they can have for businesses on our dedicated blog post.
Tip: The most beneficial fuel card for your business can be calculated based on your drivers' habits and their location coverage via a fuel card comparison tool. This is the best way to select efficient fuel cards and to see if your current cards need to be updated based on any changes within your business.
As the plan is created for all to see and be aware of, it creates complete transparency within the procurement process. Should, for any reason, anything go wrong, it is an easy base point for everyone to go back to and develop a solution from. Furthermore, if anything should go wrong, with a plan in place nothing else should be affected as a clear pathway for the procurement of all items is clear, and does not need to have a ripple effect across the board.
Tip: Remember, a plan isn't set in stone and some level of flexibility needs to be given for changes that could happen beyond your control. Even though you've planned which suppliers you'll be using, ongoing market research should be undertaken throughout the year. Based on this research, you should be prepared to amend your plan to reflect any supplier changes or product cost reductions that can be negotiated.
4. Planning Vs Performance
Although planning is the starting point of the procurement process, one of the benefits of procurement planning is that you can use it to measure each step of the way; as a tool for analysing performance. By using the plan as the source to track performance against, you can easily identify any causes for not meeting any targets and see if any changes need to be made to the plan further down the line. If you are in management or are head of the department, this is a helpful tool during appraisals, or for giving any constructive feedback you feel may be necessary.
Tip: Make sure any changes to your plan are logged accurately, with a note explaining the reason for the amends, with the correct dates to match the actions. 100% accuracy is needed to track performance data correctly so you can re-use and refer to this data.
5. Future Strategy Development
Not only is effective procurement planning beneficial for real-time performance measuring, but it can also be really useful when developing and perfecting an effective procurement strategy or model to be re-used and modified across various projects or future plans. Having measured performance, further analysis can then be undertaken to decide which methods are effective and which need further development, paving the way for an effective strategy to be created, based on real data of what has previously worked.
Tip: When developing a strategy, try to also refer to your predecessors' procurement plans where possible. There may be patterns and methods that correlate or can be merged with the current plans to optimise the strategy.
The advantages of procurement planning affect the upcoming actions of the department as well as those in the near and far future, making planning an essential part of the procurement process. Planning is just one part of the puzzle in order to achieve successful procurement. To find out more about the other areas that need to be considered for successful procurement to take place, please check out our full guide.