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Ignore effective procurement planning at your peril

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Common idioms such as “it pays to plan ahead, it was not raining when Noah built the ark” give an impression that there is a cost associated with lack of planning.

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An analysis of the planning process exposes a situation that one who plans actually brings the future into the present so that one can do something about it now.

Planning is, therefore, a wholesome process that should consider the element of quality, schedules and price on every procurement project. Lack of planning is generally accepted as a good technique for planning to fail.

Procurement personnel sometimes are embroiled in the planning puzzle when they fail to initiate procurement transactions on time. Where they are not part of maverick arrangements, they normally tell off users that a lack of planning of the other part would not constitute an emergency on their part.

Effective planning starts with the assessment of the requirements. A good plan would answer the what, when and how in procurement. It would detail what will be required in terms of material and service requirements necessary to meet the customer needs.

Specifications designed should be fit for purpose. This implies that designs should consider the intended use, so that the requirements are optimal. Failure to achieve optimal specifications leads to two possible outcomes, the requirements may be over or under specified. Over specifications is termed gold-plating in procurement. This is a scenario where the item purchased will be in a position to achieve the objective, only that the costs will be exorbitant. This inescapably increases input costs rendering the product or service uncompetitive at the end of the day.

Under-specification presents a situation that has the same impact on the organisation. The output will not be able to achieve the desired goals. Although it may be produced at a lower costs, it increases costs because of the supplementary activities necessary to achieve the desired objective. The supplementary activities involve reworking and such activities increase costs in the production process as well as costs associated with delays in production.

Planning of requirements has a direct impact on schedules. Failure to meet schedules is attributable to two scenarios. Every item has a lead time and failure to take into account the lead time at the planning stage brings forth the risk of failure to meet schedules.

However, some items are available off the shelf and in such cases, schedules may also be missed when one does not consider the internal lead time.

Every organisation has bureaucracies that must be followed to conclude a procurement. Such time related to the bureaucracy will need to be planned for if schedules are to be met. There is a necessity to consider the time that general production takes. Planning of items that are produced on order would need to aggregate supplier production, time together with the internal lead so that customer delivery schedules are met. In recognition of the importance of planning, some organisations actually employ a fully-qualified planning unit to manage schedules given the complexities.

Planning includes the consideration of the associated costs of a product. This comprises of the process of budgeting that takes into account the material resources required and their related costs. Many at time projects suffer budget overruns not because of price escalations or scope changes. The planners would have failed to plan on the appropriate quantities or that their base price was wrong. An effective procurement plan is, therefore, a plan that has a balance of the quality required, schedules and cost.

Given the complexity of the process and the impact it has on the organisation, it is high time such activities are regarded strategic in organisations for them to remain competitive.

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