Project Management and How It Relates to Purchasing and Supply Management - Term Paper Example

Project Management and How it Relates to Purchasing and Supply Management Introduction In the past few years, the majority of business organizations has started carrying out their business operations in the form of projects. In other words, they initiate projects to conduct certain business operations. In this scenario, project management is used to manage these projects. Basically, the project management is an approach that encompasses a wide variety of planning and control practices that provide a wide-ranging view of managing projects in any commercial and industrial sector. In fact, it provides a synchronized approach to the project. In view of the fact that quick changes in worldwide economy, increase in competition, advancements of technology and need for high quality products, goods and services have added to challenges in project management which caused the increasing need for knowledgeable and experienced people and threatening likely delays. Hence, project management plays a significant role all the way through the business environment for the reason that it establishes a close relationship between the operational side of business effectiveness and cost to the tactical side of experience to competition and external environmental uncertainties (Mitra & Tan, 2012; Kerzner, 2006). An organization must understand and apply management principles with the purpose of effectively managing and controlling organizational change. In this scenario, these principles can be adopted for either improvement or strategic. In fact, it is particularly right in case of supply chain management. For instance, a business organization carries out a wide variety of activities as their improvement programs which can comprise: Shifting their supply chain from a local to global environment Outsourcing some of the business operations to another organization (such as packaging or manufacturing) Organizing and managing business deals Managing relationships with their suppliers Launching programs for cost reduction Inventory management Above mentioned activities require a great deal of coordination of resources in order to achieve an established goal within time and budget (Supplychain-Mechanic, 2013). In this scenario, project management processes are required to perform these operations successfully. The basic purpose of this research is to analyze project management in the context of its use in procurement and supply management. Procurement and Project Management Procurement is the most important element of a business industry. It encompasses a wide variety of aspects of project management such as acquiring material, goods, equipment, and services from external firms. However, procurement does not include other internal departments inside an organization. In view of the fact that procurement is a domain for which a project manager will be responsible for providing information and input, in various and possibly a number of firms, hence it is believed to be an area that the project manager does not own. Though, the project managers generally are not authorized to take part into contracts in support of the business organization, as well as they are not responsible for controlling the contracts once they are prepared or in process. However, it is still a most important area which an organization must need to have knowledge of. In this scenario, the project Management Institute (PMI)’s Project Management Body of Knowledge (PMBOK®) outlines six key processes that deal with certain Project Procurement Management knowledge areas (Mochal, 2007). Plan purchases and acquisitions: This process of project management is concerned with identifying and determining the resources that need to be acquired for a project and when a project needs them. This area of procurement comes directly under the control and authority of the project manager, for the reason that the top management and organization’s purchasing committee do not have knowledge of what each particular project needs and what resources should be provided to the project team (Mochal, 2007). Plan contracting This process of the project management with respect to procurement requires the project manager to develop a detailed specification of requirements for all the required goods, materials, products and services a project team will require as well as the entire project management team must be involved in this process. In addition, the project management team also needs to search for reliable firms that can provide these goods, products and services (Mochal, 2007). Request seller responses This process requires the project management team to identify a list of suppliers to collect and analyze information with the purpose of determining their potential and charges through price quotes and vendor proposals. In this scenario, project management team can play a significant role in confining a long list of potential firms with the purpose of a short listing only the competent firms. Even though the project management team can carry out most of the tasks involved in this process, however it is normally a process that comes under the control of purchasing department (Mochal, 2007). Selection of a Supplier The selection of a supplier is associated with essentially selecting the most appropriate supplier that will provide the materials, products or service required for the completion of a project. Though, this process usually comes under the control of the purchasing department however the project team is responsible for making the final decision regarding the selection. In addition, purchasing department of an organization normally signs the final contracts on the behalf of the organization. The research has shown that the majority of business organizations do not allow their project management unit to take part in official contractual relationships (Mochal, 2007). Contract administration Once the decision regarding the selection of a supplier has been made then comes the step of contract administration. Basically, this process deals with building and maintaining the relationship with the supplier firm. In this scenario, the project manager is believed to be responsible for working on a daily basis with the supplier’s account manager (Mochal, 2007). Contract closure The process of contract closure takes place only if the contractual relationship existed only all the way through the project lifecycle. For example, if a company signed a contract to acquire raw materials for a specific project, then this contract will exist until the project is completed. In this scenario, project team plays a significant role all the way through this process. In fact, the project team will work in cooperation with the purchasing department to make certain all the agreed tasks have been successfully completed and to get comments regarding the supplier relationship (Mochal, 2007). From the above discussion it is clear that in the majority of business organizations, the project manager should have knowledge of the fundamentals of procurement management and purchasing tasks, however it is believed to be a significant job that project managers carry out in cooperation with the procurement department. In this scenario, the project manager is responsible for providing requirements for the procurement professional in order to ensure that a decision regarding selection of a particular supplier is correct; in the same way the procurement professional in turn offers direction to the project manager in managing the supplier relationship effectively (Mochal, 2007). Project Management and Supply Chain Management In the majority of business organizations the survival of successful project management depends seriously on the proper execution of the supply chain process, for the reason that well-timed, accurate, and well-organized delivery of materials, equipment, supplies and resources are critical to success of project management. The research has shown that changes in product orders, material supply, customer forecasts, or unavailability of human resources can significantly influence project schedules with respect to having to delay or accelerate project completion. However, in some cases these changes in supply and demand take a lot of time to become apparent in project management plans and schedules, "incidental" work, resulting in missed milestones, cost overruns and penalties. In order to deal with such project management issues, the business organizations need to implement a common management system that breaks down the management into various components such as supply chain management, human resource management, cash management, demand planning and project management to make sure that human and physical resource use is maximized (Kinaxis, 2013). The nature and processes of project management vary from project to project depending on various aspects such as project duration, resources, budget and so on. However, project managers, irrespective of restraints, site, or state origins have a common feature, which is known as experience. Without a doubt, each project manager’s experience level can be acknowledged as an exclusive unit that completely depends on their individual education, knowledge, training and experience. Additionally, understanding how and when to put into practice particular project management techniques, tools and approaches, improves with the advancement of the project manager’s experience. In this scenario, expanding project management scope, for instance supply chain management, encompasses techniques, tools and approaches offering supplementary information sets that can be used all the way through project lifecycle. Basically, supply chain management (SCM) is the process of maintaining the flow of information, relationships and supplies across the organization’s boundaries to provide superior economic value and customer service (Henrie, Project Management: The Supply Chain View, 2007; Ala-Risku, Collin, Holmstrom, & Vuorinen, 2010). How does Supply Chain Management Apply to Project Management? As discussed above, SCM is the process of maintaining the flow of products from the delivery of raw material to delivery of final products. In this scenario, management of material flow from acquiring the raw material through the additional value change process to distributing the final product is the major project activity. However, both supply chain management and project management are believed to be parallel processes. In addition, this close resemblance offers a solid base to expand the project management field to integrate supply chain management (Henrie, Project Management: The Supply Chain View, 2007; Ala-Risku, Collin, Holmstrom, & Vuorinen, 2010). Additionally, the managers of supply chain operations pay a great deal of attention to coordinating and combining these flows of materials by implementing a particular arrangement of work tasks across place and time, clearly identified inputs and outputs, with a start, an end, and an organization for operations. Similar to supply chain management, project management is also an organized method of managing and organizing work tasks in a particular sequence across place and time (AZTech Training & Consultancy, 2007; Titus & Brochner, 2005). In addition, the integration of project management into supply chain management can improve the efficiency of a business organization. In fact, it can improve the quality of supply chain management. Additionally, the project management team can diminish the risks involved in the supply chain by unmistakably determining and connecting material and product needs to particular jobs and the resulting planned requirement schedules. In this scenario, establishing this relationship of supply chains needs can be determined through the project plan beginning, with the purpose that the development of the work breakdown structure can be made possible within the project plan, as well as fully complete in the material demands endeavors. Hence, this multi-pronged process can present an apparent relationship of service or material needs from the initial plan until the service or material is assigned within the context of the project. To put it briefly, SCM is a significant knowledge and skill set for the project management team. Hence, effectively putting into practice the tools, knowledge-base and skill sets can support the project team’s completion and delivery of the final service or product within budget and on time. However, the accomplishment of the highest level of SCM requires the business organizations to hire skilled and experienced people. Moreover, they should be capable of unmistakably tracing the service or material needs to an element of the overall project (Henrie, Project Management Supply-Chain Challenges, 2006). Recommendations Project management can play a significant role in the procurement. In this scenario, the business organizations should keep in mind the following areas when dealing with project procurement: Procurement Planning: The role of project management in procurement starts from the planning where a business organization must clearly define and understand all contract actions, determine fluctuations of currency, identify with business requirements and goals, understand upfront issues, lead times and risk management processes; get agreement from the all the business stakeholders with a detailed plan to ensure effective supplier relationships and communication and make use of peer review to confirm practicality and recognize other risks. Procurement Process: At this step, a business organization can make use of project management knowledge and expertise to analyze schedule and budget for procurement operations. Additionally, it will help them clearly identify requirements, write SOWs (statement of work), set up contract types, develop sourcing base to build up selection method allowing a business organization to build an agreement from an auction or master agreement as well as set up contract management between a supplier and a purchasing enterprise, by recognizing purchasing, distribution terms over time and expenses. In this scenario, these features facilitate smooth contract formation that saves a lot of time and get rid of recurring activities (Dhoble, 2010; Edmonds, 2010; Duggan, 2013). Procurement relationship: The project management helps a business organization build effective relationships with its suppliers. In order to establish an effective relationship a business organization must hire committed procurement personnel essential to project management who will evaluate and agree procurement assumptions and plans (Dhoble, 2010; Edmonds, 2010; Duggan, 2013). Contract Administration: The management and administration a contract is an essential part of the organization’s procurement process. In this scenario, a contract can be effective managed by establishing a project office unit which is responsible for keeping track of contract changes, deliverables (such as review, reception, approval and comments), and contract communication; institute subcontract management function. These steps will facilitate a business organization to keep track of resources and expenditures for a particular project process (Dhoble, 2010; Edmonds, 2010; Duggan, 2013). Contract Closure: After the contract closure, there should be a review for determining the quantity and quality of the supply of materials, services and products. In this scenario, they should be strictly monitored to support its clients with the purpose of recognizing the vital success criteria of the procurement process: materials should be supplied appropriate to the conditions defined in the contract, both punctually and technical features (Dhoble, 2010; Edmonds, 2010; Duggan, 2013). Aftercare: In order to make the procurement process a success, there is a need for reliable aftercare and organizational record, which should be carried out by a variety of professionals from the legal and financial settlement of purchases. In addition, even a project is in progress, the performance of the suppliers should be constantly assessed and, where essential, alternatives should be adopted. Moreover, these services should be offered for either one or more elements of the scope, taking accountability, in a guiding, managing, supporting and coaching position, relying on the requirements of the client. With all these important aspects, the success of procurement management is measured by its investments, and distribution approval (Dhoble, 2010; Edmonds, 2010; Duggan, 2013). Conclusion This paper has presented a detailed analysis of the project management function in the context of its role in procurement and supply chain management. Project management is a set of well-organized and synchronized processes, and each process is connected with another however the basic purpose remains to achieve a common goal. The research has shown that both the project management and supply chain management are similar disciplines. The research has also shown that if both supply chain management and project management are combined effectively then it can improve the performance and efficiency of a firm. This paper has also discussed various aspects associated with procurement and purchasing. This paper has also presented recommendations on how to use project management to improve procurement and supply chain processes. In short, the survival of successful project management depends seriously on the proper execution of the supply chain process, for the reason that well-timed, accurate, and well-organized delivery of materials, equipment, supplies and resources are critical to success of project management. References Ala-Risku, T., Collin, J., Holmstrom, J., & Vuorinen, J.-P. (2010). Site inventory tracking in the project supply chain: problem description and solution proposal in a very large telecom project. Supply Chain Management: An International Journal, Volume 15 Issue 3, pp. 252-260. AZTech Training & Consultancy. (2007). Integrating Project Management into Supply Management: Project Management for Supply Chain Professionals. Retrieved April 09, 2013, from http://www.a2z-technology.com/courses%5C232.asp?sj=232 Dhoble, N. (2010, September 16). Managing procurement for Projects. Retrieved April 05, 2013, from InfoSysBlogs.com: http://www.infosysblogs.com/supply-chain/2010/09/managing_procurement_for_proje.html Duggan, T. (2013). Importance of Purchasing & Supply Management. Retrieved April 10, 2013, from eHow.com: http://www.ehow.com/info_7985249_importance-purchasing-supply-management.html Edmonds, J. (2010). How training in project management can help businesses to get back on track. Industrial and Commercial Training, Volume 42 Issue 6, pp. 314-318. Henrie, M. (2006). Project Management Supply-Chain Challenges. Retrieved April 10, 2013, from http://www.asapm.org/asapmag/articles/PMSupplyChain.pdf Henrie, M. (2007). Project Management: The Supply Chain View. Retrieved April 12, 2013, from http://www.asapm.org/asapmag/articles/PM_WorldView.pdf Kerzner, H. (2006). Project management: A systems approach to planning, scheduling, and controlling (10th ed.). New Jersey: John Wiley & Sons. Kinaxis. (2013). Manage Your Projects in the Same System You Manage Your Supply Chain. Retrieved April 10, 2013, from http://www.kinaxis.com/operations-performance-solutions/project-management.cfm Mitra, S., & Tan, A. W. (2012). Lessons learned from large construction project in Saudi Arabia. Benchmarking: An International Journal, Volume 19 Issue 3, pp. 308-324. Mochal, T. (2007, May 07). Understand your role in procurement management. Retrieved April 07, 2013, from TechRepublic.com: http://www.techrepublic.com/article/understand-your-role-in-procurement-management/6181834 Supplychain-Mechanic. (2013). Role of Project Management within procurement and supply chain. Retrieved April 05, 2013, from http://supplychain-mechanic.com/?p=275 Titus, S., & Brochner, J. (2005). Managing information flow in construction supply chains. Construction Innovation: Information, Process, Management, Volume 5 Issue 2, pp. 71-82. Read More