After all the thinking and planning that will undoubtedly have been spent on any big project, it is time to finally move to the first concrete step of a project’s lifecycle: procurement.
Every project needs resources such as labor, raw materials, equipment and services. These resources, which are used in a variety of ways, must be purchased by the organisation behind the project. Procurement means obtaining all of those resources required for the project to run smoothly and finally complete it.
Project procurement management, on the other hand, encompasses the processes with which you make sure a project’s procurement is successful. This entails the creation and maintenance of relationships with external resources needed to complete a project. Therefore, a project’s procurement manager communicates with vendors to buy, rent or contract products and services needed to achieve project objectives.
Procurement management may be necessary for a variety of industries where projects require outsourced materials or services. Industries like construction, manufacturing, engineering and technology all commonly use project procurement management to meet their project objectives.
Understanding the processes, benefits and uses of a project’s procurement management can help you more effectively achieve your project goals. This begs the question: across all these different stages and industries, what are some good practices that can maximise a project’s outlooks?
1. Co-operation
Larger projects always involve multiple stakeholders, suppliers and departments. Because of this, the project’s procurement team must carefully balance the needs of all of those and optimise the communication between them. If you can reduce lapses in communication, then you will also ensure organisational success.
You would think that something as easy as ordering a product or service is easy, but when done on a huge organisational scale, the task of qualifying and managing a supplier is anything but. Moreover, suppliers must be accurately chosen from the very beginning, as supplier selection can determine the smoothness and success of the procurement until a project is fully completed. Involving suppliers early in the project is often an overlooked aspect; the earlier a supplier is involved, the easier it is to deliver information requirements, identify alternate solutions, improve cost certainty and provide higher assurance of on-time delivery during construction.
The process of identifying a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor can be overwhelming in the end. If managed manually, just a simple process of submitting one vendor invoice can consume several hours.
2. Focus on more things than just cost
If your enterprise tends to view procurement only as a matter of logistics and cost containment, implementing a new perspective could be overdue. Cost management still matters, but progressive procurement organisations have evolved to consider nonfinancial aspects as well — priorities like innovation, risk management, resilience, and corporate citizenship.
The organisations performing the best when it comes to procurement are actually those that take these factors into account and drive their enterprise growth by new means. These include facilitating internal collaboration with stakeholders, identifying new sourcing opportunities, strengthening organisational agility and efficiency, and reducing risks.
One thing businesses have learned during the supply chain crisis over the past few years is how fragile a supplier ecosystem can be — especially those that are easily disrupted by unpredictable events.
Beyond greater financial opportunities, procurement leaders using new ways of thinking can introduce other competitive advantages to their businesses by embracing new processes and adopting new technologies that give it a greater strategic role. This will not only help improve offerings and suppliers’ capabilities, but produce benefits such as environmental stewardship and enterprise resilience.
3. Increase transparency
It’s quite simple: transparency is the key feature to a project’s procurement. Usually, transparency is considered as operating in such a way that it is easy for others to see what actions are performed. Transparency in business implies openness, communication, and accountability. Due to this, procurement should be based on rules guaranteeing fair and non-discriminatory conditions of competition.
Generally, a transparent procurement system ensures that all the team members as well as the qualified suppliers have equal access to all system elements, including procurement methods, legislation, evaluation criteria, technical specifications, supplier rights, etc.
Benefits of transparent procurements include minimising duplicate items, better record management, bulk purchasing possibilities and advanced strategic planning. One of the other major benefits is a big cost reduction as the more transparency you have into who is buying or approving what, the more you will be able to identify areas of savings and efficiencies.
4. Optimise logistics and inventory
As profit margins shrink in certain industries, organisations are constantly looking for ways to control their spending and improve the bottom line. Therefore, it is important for procurement teams to constantly review their inventory and ensure that it stays at optimal levels.
This is due to the fact that the ‘real cost’ of holding inventory is much higher than the cost of ordering items, and can in fact account for 20 to 30 percent more costs. Sometimes you have no other options than to hold inventory, but it is worth remembering that it always involves risk and that the major reason for out-of-balance inventories is poor planning and forecasting.
Due to this, procurement managers need to constantly optimise as much as they can, and have tools to measure things as easily as possible. Just a few aspects that need measuring include analysing if the procurement team over- or under-purchase products, what the optimal frequency of purchases is and if all purchase requisitions and orders are in sync with inventory levels.
5. Digitalise operations
In an unpredictable and rapidly changing environment, the ability for a company to compete may depend on managing its enterprise spend by digitalising sourcing processes and sharing information to help you boost its agility, visibility, and digital connectivity.
Taking procurement digital is a critical step in making procurement activities future-proof. Digital procurement solutions help teams reduce the repetitive operational parts of procurement, freeing up team members to focus on strategic roles.
As technology continues to become an integral part of our everyday activities, a complete digital transformation for procurement activities is inevitable.
By using a cloud-based platform, your procurement practice can provide internal stakeholders and partners timely and forward-looking analysis that empowers them to make better decisions, explore more scenarios, and support a continuous, agile planning model. This will create a dynamic flow of information, which will mean your organisation can manage its procurement planning with greater confidence, collaboration, accuracy, and flexibility.
Conclusions:
Well-executed procurement management provides several project benefits. When carefully planned and executed, procurement management can help increase certainty and quality, control costs, and reduce project risks overall. This increased certainty will help increase stakeholder confidence in the timing and quality of products and services the project aims to deliver. Being able to solidify procurement-related costs helps to ensure projects can deliver within budget, and a thoroughly developed and executed procurement management process can keep your project deliverables on track.
At LogiNets, we provide material management platforms through which you can easily track materials and shipments across your entire supply chain. Our software is designed with ease-of-use in mind and can be used by all participants in the project network; covering everything from procurement to final installation. Be it suppliers, forwarders or managers who utilize the platform, it will give them complete visibility of the material deliveries throughout all the project’s different stages. The system can also be deployed for customers’ projects within 5 working days.
We would love to help with your material handling questions; if you’d like to know more about our software, please don’t hesitate to contact us or book a demo at the link below.
