3 Steps to Managing Suppliers

3 Steps to Managing Suppliers

To manage suppliers effectively, you need to put in place a Procurement Management process. Procurement Management is the process of managing the supplier's delivery of a scope of work within a project. By controlling the scope of work provided by suppliers, you can:

Ensure that suppliers deliver in accordance with the contract
Identify and resolve supplier issues quickly and easily
Get maximum performance out of your supplier relationships

The Procurement Management process involves these 3 steps:

Step 1: Issue Purchase Orders
For each item that you require from suppliers, you need to issue them with a formal "Purchase Order". A Purchase Order describes the items you're purchasing from them (whether it be a good or a service), the timeframes for delivery and the expected price. The process for the issuing purchase orders is as follows:

Identify Procurement Items: You first need to review your Procurement Plan to identify the items that need to be sourced from external suppliers.
Create Purchase Orders: Then document the Purchase Orders for the supply of these items to the project and obtain their internal approval prior to being distributed.
Issue Purchase Order: Each Purchase Order should then be delivered to the relevant Supplier. Upon receipt, the Supplier will need to define an ETA (Estimated Time of Arrival), providing the likely timeframe for delivering the requested items to the project.


Step 2: Fulfill Purchase Order
The next step in the Procurement Management Process is the fulfillment of the Purchase Order by the Supplier. The following procedures are followed:

Receive Items: After receiving the Purchase Order and issuing an ETA, the supplier completes the order by producing the items for the project. The items are provided to the designated location and confirmed by the project as being received.
Review Items: The Procurement Manager assesses the items to determine whether they meet the description in the Purchase Order. The assessment may involve a physical inspection or a series of reviews to ensure that the procured deliverables were on time, within cost and to the level of quality required.
Resolve Issues: If the review concludes that one or many of the requirements stated in the Purchase Order have not been met, then the Procurement Manager raises an issue. The impact and severity of the issue is rated, and the Project Manager helps lead the resolution of the issue with the Supplier
Accept Items: After resolving any delivery issues, the Project Manager accepts the items on behalf of the project team.
Approve Payment: The supplier issues an invoice to the project for payment. The invoice is then approved and paid and the terms of the contract for those procurement items are complete


Step 3: Manage Supplier Contract
During Steps 1 and 2 above, the project team need to manage the overall performance of the supplier, by completing the following procedures:

Identify Milestones: The first step in managing a supplier's performance is to initiate a formal review to assess the suppliers performance, each time a milestone is reached in the contract.
Assess Performance: The suppliers performance is reviewed, to determine whether the items delivered meet the contract terms.
Identify Performance Issues: If any deviations from contract are identified, then a formal issue is raised with the Supplier.
Resolve Performance Issues: The project team and the supplier negotiate a satisfactory solution to the issues raised, and the milestone in the contract is approved.


And that's it! By taking these 3 steps, you will be able to get the most out of your supplier relationships by closely managing their performance—increasing your chances of achieving project success!

Click to download the following templates now:

Procurement Plan
Procurement Management Process
Purchase Order Form
Procurement Register



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