8 Steps to Create an Effective Procurement Process Manual

Jun 12, 2022 | Procurement in manufacturing industries

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Jun 12, 20223 min read

Creating a procurement manual involves defining procurement policy, determining roles and responsibilities, establishing procurement procedures, defining criteria, developing a communication plan, evaluating supplier performance, and providing training. A comprehensive procurement manual helps streamline procurement activities and protects the organization from potential risks.

Creating a procurement process manual is a crucial part of any successful business operation. A procurement manual serves as a resource guide for the company’s employees, providing clear instructions on the steps that must be taken when procuring goods and services. The manual will also help protect the organization from potential risks associated with procurement. By following the instructions outlined in your manual, you can ensure that each procurement activity is carried out in accordance with the organization's policies and procedures. 

Understanding Key Components of a Procurement Manual 

Once you have defined the overall process, it’s time to start building your procurement manual. There are several key components that should be included in your manual, such as policies and procedures, forms and templates, and a glossary of terms. The policies and procedures section should include a detailed overview of the steps that must be taken during the procurement process. This should include information on how to initiate a request, how to approve purchases, and how to track progress. You should also include any relevant regulations or laws that must be followed. 

The forms and templates section should include document templates that can be used to streamline the procurement process. This includes templates for purchase orders, contracts, and invoices. Make sure to include as much detail as possible so that all parties involved have a clear understanding of what is expected of them. 

It is also important to include a section on vendor management. This should include information on how to select vendors, how to evaluate their performance, and how to manage any disputes that may arise. This section should also include any relevant policies and procedures related to vendor management. 

Here are the steps to create a procurement process manual: 

  • Define procurement policy: This step involves establishing the overarching principles and guidelines that will govern procurement activities. The policy should clearly state the purpose, scope, and objectives of the procurement process. For example, your procurement policy might state that the objective of the procurement process is to ensure that goods and services are procured in a timely and cost-effective manner, while adhering to ethical and legal requirements. 
  • Determine roles and responsibilities: This step involves identifying the various roles and responsibilities involved in the procurement process, such as procurement planning, sourcing, contract management, and supplier performance evaluation. For example, a procurement manager might be responsible for leading procurement planning and strategy development, while a procurement specialist might be responsible for managing the sourcing process. 
  • Establish procurement procedures: This step involves developing a detailed set of procedures for each step of the procurement process, such as requisition, selection, evaluation, negotiation, and contract award. For example, the procurement procedure for requisition might involve creating a requisition form, obtaining approvals, and submitting the form to the procurement department. 
  • Define procurement criteria: This step involves specifying the criteria that will be used to evaluate suppliers, such as quality, price, delivery, and service. For example, the quality criterion might involve ensuring that the supplier has a proven track record of delivering high-quality products, while the price criterion might involve ensuring that the price is competitive and reasonable. 
  • Develop a communication plan: This step involves establishing a plan to communicate procurement activities and decisions to all relevant stakeholders, such as management, suppliers, and employees. For example, the communication plan might involve regular status updates, progress reports, and supplier performance evaluations. 
  • Establish supplier performance management: This step involves setting up a process to evaluate supplier performance and address performance issues. For example, the supplier performance management process might involve regular evaluations, performance scorecards, and regular meetings with suppliers to discuss performance issues and improvement opportunities. 
  • Review and revise: This step involves regularly reviewing and revising the procurement process manual to ensure that it remains up-to-date and relevant to the organization's needs. For example, the manual might be reviewed annually to reflect changes in procurement laws and regulations, or changes in the organization's procurement strategy. 
  • Provide training: This step involves providing training for staff involved in procurement activities to ensure that they are familiar with the procedures outlined in the manual. For example, a training program might involve a series of workshops and online courses that cover procurement procedures, criteria, and communication best practices. 

A well-designed and implemented procurement process manual can greatly contribute to the success of an organization's procurement activities and contribute to its overall performance and competitiveness. FactWise is an end-to-end cloud-based procurement platform for global product manufacturing companies across industries. FactWise delivers a near-instant time to value and significant ROI and is offered at a fraction of the cost of its competitors with no additional hidden costs. The solution implements instantly with Open APIs so that teams can start using it immediately with their data while our team integrates with their other existing systems within a month. The minimal, intuitive interface does not require trainings and is consistently rated as the easiest to adopt, by global procurement leaders across industries. Smart dashboards and automated, customizable workflows help increase efficiency while a comprehensive suite of dynamic, holistic analytics across key supplier metrics and RfX management helps teams unlock savings potential. FactWise S2P can be leveraged to increase operational efficiency by 20% and reduce direct materials costs by 25%.  

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


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