Planning the Procurement of Goods from Suppliers

Planning for Procurement

Procurement involves planning and controlling the buying process for goods or services from suppliers.
The planning phase of procurement focuses on identifying what’s needed, when it’s needed, and how much budget is available for it.
Businesses must consider future needs and possible constraints when planning. Strategic foresight helps to ensure smooth operations and limit the risk of shortages.

Identifying Needs

Identifying procurement needs involves understanding current inventory levels, production plans, and forecasted demands.
Effective procurement planning starts with an accurate picture of existing assets and potential future requirements.
Not only the products themselves but also their quality, quantity, delivery time, and storage requirements should be considered when identifying procurement needs.

Budgeting and Costing

Budgeting in procurement refers to estimating the cost of acquisitions and ensuring that the necessary funds are allocated.
Considering long-term needs is essential in budget planning for procurement. A business must plan not only for immediate needs but also for maintenance and possibly seasonal demand fluctuations.
Costing involves estimating the total cost of a procurement, including item cost, shipping, taxes and any possible additional expenses or benefits from discounts. It’s an important factor in the supplier selection process.

Supplier Selection

Businesses must consider various criteria when selecting suppliers, like price, delivery time, quality, reliability, and payment terms.
A supplier’s reputation and past performance can be critical in the selection process.
A good relationship with suppliers can enable better prices, preferential treatment in tight supply situations and more flexible contract terms.

Procurement Documentation

Accurate and accessible documentation is essential to manage procurement effectively. It keeps track of decisions, contracts, and progress throughout the procurement process.
Typically, procurement documentation includes specifications, procurement plans, contracts, delivery receipts and invoices.
Businesses use this documentation for audit and performance review purposes, helping to improve future procurement planning and execution.

Review and Evaluation

Ongoing review and evaluation of procurement activities are needed to identify areas for improvement.
Critiques and feedback from all stakeholders involved in the procurement cycle should be considered in the review process.
Learning from past experiences helps businesses adapt and improve their procurement plans and strategies, leading to better resource management and cost-effectiveness.

Proper procurement planning is a crucial task for all businesses. Efficiency in planning the procurement of goods from suppliers can drive cost savings, improve supplier relationships, and ensure a stable supply of needed goods and services.