Procurement Strategy: Develop a Rock Solid Strategy
A procurement strategy is a necessary frustration for every business, from the budding startup to the mega corporations. Whether you’re just shopping for office supplies or sourcing materials for major projects, your procurement strategy can hugely impact your company’s bottomline. Keep reading to learn more about different types of procurement strategies and to see procurement strategy examples in plain English.
What Is a Procurement Strategy?
Basically, a procurement strategy is a plan to buy the things your company needs while meeting specific goals.
To put it in a familiar context, why don’t we start by thinking about a procurement strategy you already know? Your home procurement strategy is a lot like your company’s (but probably not as formalized).
Maybe your shopping goals include lowering your costs and going green. Then your procurement strategy might involve investing in high-quality home supplies instead of dollar store specials.
Your company’s procurement strategy is going to be more complicated, but the idea is the same. It’s a strategy based on what your company needs to buy, its timelines, finances, and goals.
Different Types of Procurement Strategies
Every business has unique procurement strategies to meet its needs, but there are a few types of procurement strategies that are common across industries.
Green purchasing – If green purchasing is part of your procurement strategy, you’re prioritizing eco-friendly products, low emission suppliers, plastic-free packaging, and other environmentally focused features.
Cost reduction – This is probably the most common procurement strategy, because who doesn’t want to save money? And does it come at the cost of quality or vendor performance?
Global sourcing – If you prioritize cost or quality, buying from other countries may be a big part of your procurement strategy.
10 Steps to Creating an Effective Procurement Strategy
Utilize Procurement Software
Let’s be real. The best procurement strategies can only take you so far. When it comes to nitty gritty details like procurement, human error can cause huge losses.
The right procurement software can help you analyze bids, track vendor information, and reduce costs.
Organization Spend Check
Analyzing your organizational spending is like taking a step back to look at your finances. You’ll want to talk to everyone involved in your company’s procurement process: stakeholders, suppliers, the works.
That will help you get a clear picture of where the money is going, from individual items and services to overlooked fees.
Understanding Business Needs
Alright, now you know where the money is going. Where does it need to go for your business to grow? Challenge your assumptions and your comfort zone.
If this is hard for you, try using a tool like The Kraljic Matrix. In the simplest of terms, The Kraljix Matrix tells you how much to focus on procuring different supplies. You won’t want to spend as much time shopping for pens as you’d spend hunting for a key ingredient of your dinner.
Analyze Current Market Conditions
After you understand your procurement needs, the next step is to check out the market. You know what you need, now look at what suppliers have to offer. How are your competitors meeting their procurement needs? This is a good time to do an analysis of strengths, weaknesses, opportunities, and threats, or a SWOT analysis.
This step is essential to repeat over time, so you always have accurate information on hand.
Set Crystal Clean Objectives
You know what your business supply needs are and what the market has to offer. It’s time to define your objectives. Your most basic objective is to support your company’s needs. After that, you’ll want to rank your procurement objectives in relation to your bottom line.
Eliminate Inefficiencies & Define Policies
With your objectives in hand, you can get to an integral element of procurement strategies: the policies. Policies address inefficiencies, like the risks you found in your SWOT analysis. These are the guidelines that let everyone know your company’s best procurement practices.
To set yourself up for success, you’ll want to start with a template or by revising existing policies.
Procurement Strategy Outline
Good news! If you’ve reached this step, you have your procurement strategy. Now it’s time to put it all together. In this step, you’re clearly defining everything you know. All of the data that helped you along the way gets documented in an easy to understand and update document.
Touch Base With Stakeholders
Now, you’ve got solid information and guidelines in place. Your next step is to talk to your stakeholders. All the people you talked to to understand your company’s spending need to be a part of this conversation. Take some time to explain your findings and plans and hear what they have to say.
Implement Procurement Software
You’ve gathered your data, developed and outlined your strategy, and reviewed it with your teams.
It’s time to take it home.
Procurement software like Procoto can transform your procurement processes. Procoto gives you the leverage you need to negotiate with the big boys. Implement procurement software to streamline your sourcing process, automate purchases, and store everything you need in one place.
Procurement Strategy Example
A real-world example might help expand on procurement strategy and how procurement software can help..
Let’s look at it this way. I have a fictional coffee shop. After doing my analysis of the market, I see that my competitors are mainly supplied disposable products from China. There are other suppliers developing reusable products near me.
My procurement objectives include increasing sustainability, lowering costs, and sourcing locally. The policies I implement will involve buying reusable products to replace disposables and restricting international purchasing as much as possible.
With procurement software, you can quickly identify and field bids from your local vendors in a standardized way. All bids will be received in an identical format regardless of vendor maturity, making it seamless to choose the best ones. From there, it’s quick to send awards.
Finally, so few businesses monitor their existing contracts for renewals. By logging vendor contracts in a procurement platform, you’ll receive upcoming cancellation window notifications and never get caught in a nasty auto-renewal again.
What procurement strategy examples can you imagine? How can these processes help you?
Ready to Get Started With Streamlined Procurement?
Developing a solid procurement strategy can feel daunting, but it doesn’t have to be. Following the steps laid out in this article will help you streamline procurement. Take some time to review other procurement strategy examples and make the most of your systems.
It’s time to take your procurement game up a notch. How can Procoto improve your procurement processes?
