This lesson discusses the basics of project procurement management. Project procurement management is a critical part of overall project management, and we will use an example to show how this topic fits into everyday project management activities.
Project Procurement Management
Let’s say you’re building a computer for yourself. This is something that many of us have attempted and completed without even considering that we are building a unique product, which is a product that is custom, or has never been created before. There are many steps and factors along the way when creating our unique product, one of which is project procurement management. Project procurement management is the process that ensures that components needed for a project arrive on time and within budget and work towards finishing the project.
For instance, when building your computer, you will have your own preferred unique features and components, like style of motherboard, processor, case, and monitor. You have to obtain these components to make the computer function. For this task, you need project procurement management. Now that we know what project procurement management is, let’s explore the steps involved in it.
The project procurement management process has four steps.
Step 1 is plan.
This is the step where you are planning what to buy, how to buy it, what suppliers you will use, and the approach to getting what you need. With your computer project, for example, you might plan to buy your motherboard from an online IT company, while you might plan on getting a spare computer case from a friend who has no need for it anymore.
Step 2 is conduct.
This step involves actually purchasing the items, including negotiating contracts and agreements with sellers, suppliers, and contractors. Say that, for your computer, you need a cooling unit for the processor. Instead of buying something off the shelf at a store, you might enter into a contract with a custom cooling unit supplier who will make you a custom product for your computer. So, you would have to enter into a contract with the supplier before work on the cooling unit begins.
Step 3 is control.
This step ensures that everything goes according to plan during the contract creation and purchasing phase. Say that your custom cooling unit is going to take a month to develop, build, and deliver. You might require the contractor to provide weekly progress reports on the cooling unit to make sure your custom computer project doesn’t fall behind. If you see that your supplier isn’t maintaining a suitable pace on the cooling unit, you might terminate the contract and go somewhere else. During the control step, you also need to control and manage shipments of normal, off-the-shelf parts. If you are scheduled to receive a shipment on a certain date and the items don’t arrive, you use this step to find out why and make alternate arrangements if needed.
Step 4 is close.
This step is done when the purchasing or procurement stage is completed. At this point, you have received your cooling unit and every other component needed to complete the project. You can close the procurement stage of the project and focus on the ongoing assembly stage. However, you might have to revisit procurement management if you’ve missed an item you need. For example, if you forgot to order a DVD drive, you’ll need to reopen the project procurement process.
Overall Project Management
It’s important to note that project procurement management does not apply only to the development of unique products. In fact, almost every project requires some sort of outside resource and, as such, requires project procurement management. Also keep in mind that other processes of the project can be worked on during the project procurement management stage. For instance, you may be juggling several project processes, like risk analysis, schedule management, and project cost management. In fact, these other elements of projects are often closely tied to project procurement management. For instance, if we used project cost management to estimate and evaluate the costs of our custom computer, we might determine that it would be more cost efficient to buy a different style of motherboard. That decision could affect the entire project, especially project procurement management.
Project procurement management is the process that ensures that components needed for a project arrive on time and within budget and work towards finishing the project. There are four main steps involved in project procurement management, which are:
Project procurement management is critical because projects almost always need some outside resource to be completed. The elements need to arrive according to specification, on time, and within budget for the project to be successfully completed.