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CHAPTER 3
THE PLANNING, ORGANISING, LEADING AND CONTROL OF PROCUREMENT
3.2.2 IMPORTANCE OF PROCUREMENT PLANNING
Few will argue the importance of planning across a supply chain. Planning
is not concerned with future decisions but with the future impact of decisions
made today [4]. This means that the procurement plan will impact on the future
performance of a company.
It is important that procurement planning is done properly because well-crafted
procurement plans are more likely to produce the desired results for a company
[5]. Procurement planning ensures that the procurement department’s objectives
are aligned with the company’s overall goals. It calls for the procurement
department to identify organisational requirements rather than merely functional
requirements. This involves, amongst other things, identifying the production
input needs and the right suppliers.
A defective procurement plan not only wastes resources, it also exposes a
company to operational and reputational risks. A good procurement plan will
lead to, inter alia:
• Better requirements definitions. This will increase the likelihood of receiving
strong offers, which, in turn, will facilitate the evaluation process, lead to
appropriate products for the company, and easier contract management.
• Improved sourcing as a result of suppliers being managed in a more effective
and efficient manner.
• Fewer last-minute actions.
• Fewer repetitive, labour-intensive procurement activities.
• Fewer delays and shorter lead times.
• Reduced transaction costs as a result of consolidated procurement actions.
• Development of Key Performance Indicators (KPIs) for milestones and
accountabilities and monitoring systems.
• Obtaining best prices for aggregate requirements.
• Establishment of criteria to measure effectiveness of the procurement
function.
• Development of long-term agreements.
Good procurement planning is essential for optimising the contribution of the
procurement function towards achieving the company’s strategic goals.
3.2.3 PROCUREMENT PLANNING STEPS
Specific tasks form part of an interrelated and interactive procurement
management process:
• Establishing procurement objectives.
• Creating a procurement action plan.
• Drawing up a procurement schedule.
• Developing procurement budgets.
• Establishing procurement policies, procedures and rules.