Want FREE Templates on Organization, Change, & Culture? Download our FREE compilation of 50+ slides. This is an exclusive promotion being run on LinkedIn.







Flevy Management Insights Q&A
How to create an effective procurement plan?


This article provides a detailed response to: How to create an effective procurement plan? For a comprehensive understanding of Procurement Strategy, we also include relevant case studies for further reading and links to Procurement Strategy best practice resources.

TLDR Create a procurement plan by conducting a needs assessment, developing a Procurement Strategy, establishing clear objectives, selecting suppliers, managing contracts, and ensuring continuous improvement.

Reading time: 4 minutes


Understanding how to write a procurement plan is crucial for any organization aiming to streamline its purchasing process, ensure cost efficiency, and mitigate risks associated with acquiring goods and services. A well-crafted procurement plan serves as a roadmap, guiding the procurement team through each phase of procurement, from identifying needs to selecting suppliers and managing contracts. It aligns procurement activities with the organization's strategic goals, ensuring that every purchase adds value and supports overall objectives.

The first step in creating an effective procurement plan is to conduct a thorough needs assessment. This involves identifying the goods and services the organization requires to operate efficiently and achieve its strategic goals. Consulting firms like McKinsey and Bain emphasize the importance of aligning procurement needs with business strategy to ensure that purchasing decisions support long-term objectives. This phase should also involve a detailed analysis of the organization's current inventory and procurement processes to identify areas for improvement.

Once the needs assessment is complete, the next step is to develop a procurement strategy. This strategy should outline the organization's approach to sourcing goods and services, including criteria for selecting suppliers, methods for negotiating contracts, and plans for managing supplier relationships. A robust procurement strategy will also include risk management plans to address potential challenges such as supply chain disruptions, price volatility, and quality issues. Utilizing a framework or template can help ensure that the strategy is comprehensive and aligned with industry best practices.

Establishing Clear Objectives and Specifications

Clear objectives and specifications are the backbone of any procurement plan. Objectives should be SMART—Specific, Measurable, Achievable, Relevant, and Time-bound. They provide a clear direction and measurable outcomes for the procurement process. Specifications, on the other hand, detail the technical and quality requirements of the goods or services to be procured. Accurate and detailed specifications are essential for avoiding misunderstandings with suppliers and ensuring that the organization receives exactly what it needs.

Incorporating market analysis into the procurement plan is also critical. This involves researching potential suppliers, understanding market trends, and evaluating the cost and availability of goods and services. Consulting firms like Accenture and Deloitte offer insights into market dynamics that can help organizations make informed decisions and identify opportunities for cost savings or supplier innovation.

Setting clear objectives and specifications also facilitates the development of a detailed Request for Proposal (RFP) or Request for Quotation (RFQ), which are key documents in the procurement process. These documents communicate the organization's needs to potential suppliers and form the basis for evaluating bids and selecting suppliers. They should be crafted with precision to ensure that responses from suppliers are relevant and comparable.

Learn more about Market Analysis Request for Proposal

Are you familiar with Flevy? We are you shortcut to immediate value.
Flevy provides business best practices—the same as those produced by top-tier consulting firms and used by Fortune 100 companies. Our best practice business frameworks, financial models, and templates are of the same caliber as those produced by top-tier management consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture. Most were developed by seasoned executives and consultants with 20+ years of experience.

Trusted by over 10,000+ Client Organizations
Since 2012, we have provided best practices to over 10,000 businesses and organizations of all sizes, from startups and small businesses to the Fortune 100, in over 130 countries.
AT&T GE Cisco Intel IBM Coke Dell Toyota HP Nike Samsung Microsoft Astrazeneca JP Morgan KPMG Walgreens Walmart 3M Kaiser Oracle SAP Google E&Y Volvo Bosch Merck Fedex Shell Amgen Eli Lilly Roche AIG Abbott Amazon PwC T-Mobile Broadcom Bayer Pearson Titleist ConEd Pfizer NTT Data Schwab

Supplier Selection and Contract Management

Selecting the right suppliers is a critical component of the procurement plan. This process should be based on a comprehensive evaluation of suppliers' capabilities, financial stability, reputation, and compliance with quality and regulatory standards. Consulting firms often recommend using a scoring system to objectively assess and compare suppliers based on predefined criteria. Real-world examples include organizations that have leveraged supplier performance data and third-party audits to make informed selection decisions.

Effective contract management is equally important. Once a supplier is selected, negotiating a contract that aligns with the organization's objectives and specifications is crucial. The contract should clearly outline terms and conditions, delivery timelines, pricing, and quality standards. It should also include provisions for managing changes, resolving disputes, and terminating the agreement if necessary. Regular performance reviews and open communication with suppliers are key to ensuring that contractual obligations are met and relationships are maintained.

Finally, continuous improvement should be a core aspect of the procurement plan. Organizations should regularly review and update their procurement processes based on feedback from stakeholders, changes in the market, and performance data. This iterative approach ensures that the procurement function remains agile, efficient, and aligned with the organization's evolving needs and strategic goals. By following these steps and incorporating best practices from consulting and industry leaders, organizations can develop a procurement plan that delivers value and supports long-term success.

Learn more about Continuous Improvement Agile Best Practices

Best Practices in Procurement Strategy

Here are best practices relevant to Procurement Strategy from the Flevy Marketplace. View all our Procurement Strategy materials here.

Did you know?
The average daily rate of a McKinsey consultant is $6,625 (not including expenses). The average price of a Flevy document is $65.

Explore all of our best practices in: Procurement Strategy

Procurement Strategy Case Studies

For a practical understanding of Procurement Strategy, take a look at these case studies.

Procurement Strategy for a Large Scale Conglomerate

Scenario: A conglomerate of businesses spanning across multiple industries finds their Procurement Strategy inefficient, leading to spiraling costs and hampering overall profitability.

Read Full Case Study

Strategic Procurement Optimization for a Global Tech Firm

Scenario: A multinational technology firm is grappling with escalating costs and inefficiencies in its Procurement Strategy.

Read Full Case Study

Procurement Strategy Overhaul for Telecom Provider in Competitive Landscape

Scenario: A mid-sized telecommunications provider, operating in a highly competitive market, faces challenges in maintaining cost leadership while ensuring quality service delivery.

Read Full Case Study

Sourcing Strategy Overhaul for Aerospace Manufacturer in Competitive Market

Scenario: The organization in question operates within the aerospace sector, grappling with the challenge of optimizing its Sourcing Strategy amidst intensifying global competition and rising material costs.

Read Full Case Study

Sourcing Strategy Optimization for a Global Electronics Manufacturer

Scenario: A global electronics manufacturer is grappling with escalating costs and inefficiencies in its sourcing strategy.

Read Full Case Study

Luxury Hotel Chain Procurement Strategy Revamp in Competitive Market

Scenario: A luxury hotel chain faces procurement inefficiencies amidst an increasingly competitive hospitality sector.

Read Full Case Study

Explore all Flevy Management Case Studies

Related Questions

Here are our additional questions you may be interested in.

How is the rise of blockchain technology influencing sourcing strategies, particularly in terms of transparency and security?
Blockchain technology is significantly enhancing Sourcing Strategies by improving Transparency and Security in global supply chains, with real-world applications demonstrating its potential to transform traditional methods. [Read full explanation]
What strategies can be employed to mitigate risks associated with geopolitical tensions and trade policies in procurement?
Companies can mitigate risks from geopolitical tensions and trade policies by adopting Supply Chain Diversification, Strategic Stockpiling, Nearshoring, and investing in Digital Transformation, enhancing resilience and operational efficiency. [Read full explanation]
How can companies ensure ethical practices in their strategic sourcing processes?
Companies can ensure ethical practices in Strategic Sourcing by developing comprehensive policies, conducting thorough supplier assessments and audits, and building strong supplier relationships, enhancing reputation and sustainability. [Read full explanation]
How can companies effectively measure the success and ROI of their strategic sourcing initiatives?
Discover how to measure Strategic Sourcing success and ROI through Financial, Operational, and Qualitative Metrics, leveraging industry benchmarks and best practices for continuous value creation. [Read full explanation]
What role does risk management play in formulating a sourcing strategy, and how can companies effectively integrate it?
Risk Management is crucial in Sourcing Strategy, enabling companies to mitigate supply chain risks through proactive measures, technological integration, and strong supplier relationships, enhancing operational resilience and competitive advantage. [Read full explanation]
How does strategic sourcing align with corporate sustainability goals?
Strategic sourcing integrates sustainability into procurement processes, focusing on ethical, environmental, and economic outcomes, with challenges in transparency and opportunities for innovation and cost savings. [Read full explanation]

Source: Executive Q&A: Procurement Strategy Questions, Flevy Management Insights, 2024


Flevy is the world's largest knowledge base of best practices.


Leverage the Experience of Experts.

Find documents of the same caliber as those used by top-tier consulting firms, like McKinsey, BCG, Bain, Deloitte, Accenture.

Download Immediately and Use.

Our PowerPoint presentations, Excel workbooks, and Word documents are completely customizable, including rebrandable.

Save Time, Effort, and Money.

Save yourself and your employees countless hours. Use that time to work on more value-added and fulfilling activities.




Read Customer Testimonials



Download our FREE Strategy & Transformation Framework Templates

Download our free compilation of 50+ Strategy & Transformation slides and templates. Frameworks include McKinsey 7-S Strategy Model, Balanced Scorecard, Disruptive Innovation, BCG Experience Curve, and many more.