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What is Project Procurement Management? - Definition & Process

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  • 0:04 A First Glance
  • 0:47 Definition
  • 1:22 The Project…
  • 5:26 Lesson Summary
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Lesson Transcript
Instructor: Brianna Whiting
In this lesson, we'll learn how a company often obtains supplies for projects. Specifically, we'll learn what project procurement management is and the process many companies abide by.

A First Glance

Meet Betty! Betty was just promoted at her job working for Super Toyland. Her first task was to complete a big project designing a new stuffed horse. While overseeing the project, she assigned the employees to certain tasks, and everything seemed to be going smoothly. That was until Betty realized that she needed glass eyes for the horse and yarn for the tail and mane. Super Toyland does not carry either of those materials, and therefore, she cannot finish the project without obtaining them from an outside source. It was at that time that Betty learned about an important area of her company, project procurement management, which explains how Super Toyland works with outside suppliers.

Definition

So you may be asking yourself, what exactly is project procurement management? Well, it is a collaboration with outside suppliers in order to obtain or purchase goods and services for projects. These relationships are often created based on a contract so that the needed items or services are received on time and meet the standards requested by the purchasing company. So, if we take our example from earlier, Betty would benefit from meeting with the purchasing department of her company so that they can set up a contract to purchase glass eyes and yarn hair from an outside supplier, in order to finish her project.

The Project Procurement Process

Like many aspects in a business, project procurement management has a process. This process helps ensure that the supplies and goods are ordered and received, and the project is completed. Often, this process consists of five parts: initiating and planning, selecting, contract writing, monitoring, and closing and completing.

Initiating and Planning

The first step, initiating and planning, is deciding which supplies and goods will need to be obtained from an outside source. Once the project has been decided, a list of supplies needed to complete the project is created. Once this is done, the company will then specify what criteria the supplies need to meet, such as timelines and specifications. For example, if Betty were to complete this first step, she would first create the project, which is making a new stuffed horse. She would then create a supplies list, which might include stuffing, glass eyes, yarn, and fabric. Then, she would decide which items the company has or will make and which ones will need to be ordered and purchased from an outside supplier. In this case, Super Toyland has stuffing and fabric but needs to use a supplier for glass eyes and yarn. Betty then needs to specify exactly what kind of eyes, such as size, color, and quantity, as well as the timeframe in which she needs them. She will also need to specify the color, width, and length of yarn she will need.

Selecting

Once the supply list has been completed and specifications have been decided, it is time to reach out to potential vendors and suppliers that can offer the items needed. This is the selecting process. Selecting can be done with conferences and/or communication with potential suppliers so they are aware of the needs of the company and are able to answer any questions. Bidders can then submit their proposals. Because Betty knows she needs glass eyes and yarn, the purchasing department looks for vendors that offer these supplies. They then decide to invite them to a web conference so they can explain the specifications, such as color, quantity, and timeframe. Once the conferences end, all of the potential vendors are asked to submit a proposal for Super Toyland to consider.

Contract Writing

After all of the proposals are considered, vendors are chosen. The process of contract writing creates a document that outlines all of the conditions of the relationship between the company and the supplier. This is also the time when a timeframe is negotiated and decided so that the items are delivered on-time for project completion deadlines. For Betty, the purchasing department informs her that they found a craft supplier that offers both glass eyes and yarn. Betty then outlines all of the conditions she needs met as far as size, color, and quantity, to name a few, and draws up a contract. She also knows that the eyes need to be delivered by the end of the month and the yarn needs to be delivered two weeks after that in order to complete the stuffed horse on time for a big toy show coming up. Therefore, she specifies in the contract the timeframe in which the supplies need to be delivered.

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