Procurement Strategy: 8 Steps to Build It Better

Introduction:

A strong procurement strategy is essential for guiding an organization’s purchasing decisions. It’s more than just a set of rules—it’s a strategic approach to ensure you get the best value for your money while supporting your organization’s goals. This plan should not only focus on cost savings but also on how to enhance value, streamline processes, and manage resources effectively. To develop an effective procurement plan, it’s important to follow a structured approach. Here are eight key stages to building a successful procurement plan.

Why need procurement strategy?

A well-defined plan is crucial.

Long-term plans may be well-defined, but they cannot be implemented to reap the rewards. The bustle of operational duties may obscure the magnificent theoretical vision.

A good procurement strategy should promote innovative ideas that increase customer value, cost efficiency, and process improvement.

Many procurement strategies have many goals, such as:

• Better spending oversight,
• Strategic sourcing cuts costs,
• Improved contract delivery and coverage,
• Enhanced supplier connections, quality management, and product development.
• Increased consumer value and experience
• Policy and process compliance,
• Fewer purchase faults and missed chances,
• Goals for sustainable development include reducing carbon impact, increasing supplier variety, and more!

Without a plan, prioritisation, and progress monitoring, such opportunities are missed or there are too many to agree on and advance!

How do you see procurement?

The right procurement plan should address these questions:

• What are your goals?
• Your procurement vision and mission?
• Its implementation: how?
• The best firms do what?
• Getting there requires what tools and resources? How will success be measured?
• How does this tie into corporate strategy?

Answers to these questions should yield a strategy statement, action plan with timelines, and performance measures. It may be time to reassess a present approach.

Consider the organization’s goals, finances, and procurement maturity while developing a plan. Consider existing conditions, resources, and reality.

Procurement strategy aspects are interconnected and need awareness of actual spending.

8 stages to a successful procurement plan

1. Current state analysis.

Developing a procurement plan requires documenting category expenditure and market conditions. Understand the whole historical spend and analyse it by section.

Successful analysis requires identifying business reality and market environment categories with a taxonomy.

The research will provide spend patterns, opportunities, and cost reductions. This information base underpins a procurement strategy. The best method is spend cube analysis. Plan how to capitalise on possibilities, control expenses, and reduce risks.

2. Involve stakeholders while making procurement strategy.

First, determine who the plan may affect. Business managers, suppliers, finance, end-users, and subject matter experts. Managing their needs and expectations is crucial. Some may not like all the changes. Without stakeholder engagement, any plan fails. You may miss certain insights and company needs. Due to their market expertise and substance, stakeholders must be engaged to identify dangers and opportunities.

3. Align procurement strategy with company goals.

Strategy must match company strategy. Fact-based cost analysis helps you prioritise and align strategy with business goals across all areas. Strategy inputs should include:

• corporate purpose and vision
• corporation medium-term plans
• Annual budgets, revenue projections, economic forecasts, and commodity indexes.

4. Use success tools.

Big data is too sluggish, incorrect, and time-consuming to manage manually. Education-based decision-makers require fast and relevant knowledge.

A proper software solution increases visibility. A specialised expenditure analysis system will find opportunities, boost team performance and value-add, and decrease costly errors.

Accenture’s four-part blog series on digital procurement states, “Digital procurement gives decision-makers better visibility, reduces risk, and boosts compliance—ultimately increasing spend under management and driving more value for the business.” Part three of the series presents five factors:

• Data: internal and external data that affects the entire organisation
• Technology toolbox: data-driven software tools
• The alchemy that makes those technologies easy to use is intuitive user experience.
• talents and talent: team members’ essential knowledge and talents within and outside procurement
• Policies, procedures, and operational model: how to implement duties.

5. Affirm procurement policy.

New rules, processes, and operational models will be implemented at this stage. This is a good time to assess and adapt procedures to the new approach.

Instead of becoming process police, convey possibilities and visualise stakeholder advantages while implementing change. Stay flexible. If policies cause more trouble than benefit, they should be monitored and eliminated.

6. Prioritise procurement.

Purchasing is dynamic, and sourcing prospects are endless. Opportunities will arise from clean, sorted, and categorised expenditure data.

Underperforming subcategories can be recognised and addressed in action plans for business-critical spend. Select low-value/high-volume transactions for attention.

Align priorities with stakeholders to gain a common understanding and licence to operate. Set achievable goals within a defined timeframe. Define strategies like e-auction, strategic sourcing, contract renegotiation, and process optimisation to achieve them.

7. Define success metrics.

Tracking supplier and procurement performance allows for innovation and development. Employees are engaged and accountable in a performance-driven atmosphere when supplier and category performance is measured, monitored, and reported using KPIs.

To guarantee alignment and business effect, measures should match business KPIs.

8. Implement and adapt approach for procurement strategy.

Strategy evolves. Your plans must vary with external and internal factors. Think of your cherished paper as a beginning point, not an end goal. Putting your goals into action will make you wiser.

Strategy should be refined with stakeholder input. Increase strategy and action effectiveness using data and insights. New prospects may be more promising than your plan’s. This may necessitate project and timeframe prioritisation.

Conclusion:

A well-executed procurement strategy is crucial for achieving business success. It goes beyond simple cost reduction, offering value through improved efficiency, better supplier relationships, and enhanced risk management. By following the eight stages outlined, you can create a procurement plan that aligns with your organization’s goals and adapts to changing conditions. Remember, a procurement strategy should be dynamic and flexible, evolving with new insights and opportunities to continually drive business growth and competitiveness.