A well-structured procurement strategy is crucial for business success, capable of significantly increasing ROI by optimizing processes, managing costs, mitigating risks, and fostering strong supplier relationships.
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do you know how your company's roi can
grow with a well-structured procurement strategy
strategy
bet you didn't imagine such a number
if your strategy is planned thoughtfully
and aligned with the business goals you
can expect a 3.8 times higher roi
quite impressive isn't it
wondering how to achieve similar results
and build an effective procurement strategy
strategy
we are here for you in this video we
will cover everything you need to know
about procurement strategy development
and its implementation let's start from
the basics
what is a procurement strategy
imagine you're planning to organize a
birthday party for your friend
you should consider quite a lot of
things calculate the budget rent a
proper place invite guests as well as
order catering decorations and presents
it's necessary to have a step-by-step
plan to prevent chaotic acts and make
everything in the best possible way
the same thing with procurement
management all processes from purchasing
to cooperation with suppliers should be
well organized to improve operational
efficiency and reduce costs with a
procurement strategy you can provide
visibility for all stakeholders within
the chain outline budgets build
long-term relationships with competitive
suppliers acquire the necessary goods or
services in a specific cost range and
have them delivered on time [Music]
[Music]
what is the purpose of a procurement
strategy if you're wondering why you
need a separate strategy for your
procurement process the answer will be
pretty obvious
an effective strategy will help you to
allocate efforts and resources in the
right way to make your purchasing
workflow as beneficial as possible
strategic procurement allows you to
ensure that the right products are
delivered on time
obtain well-structured data to
prioritize purchases
minimize possible risks with suppliers
reduce costs and control spending how to
select relevant procurement strategies
everything starts with the goal if you
clearly understand the unique company's
objectives you have a clear course to follow
follow
there are several procurement strategies
that you can implement in your company
let's go through each of them cost
reduction if you want to increase
profits by recognizing saving
opportunities and decreasing the total
cost of ownership tco this model is the
best variant cost reduction is a complex
and multi-layered process
it's influenced by various decisions
made across the company's departments on
many hierarchy levels
it involves negotiating with suppliers
adjusting internal administrative and
operational expenses and optimizing specifications
specifications
risk management giving preference to
this strategy you can minimize the
impact of unfortunate events on the
procurement process
this strategy allows you to develop
appropriate responses to potential risks
core elements of risk management
strategy include the following steps
monitor and identify the risks
understand their origin nature and
possible impact prioritize and mitigate
risk events based on the impact force on business
business
communicate risk management practices to
teams involved in procurement
supplier management optimization and
relationship building
this strategy is about managing
suppliers and building relationships
with partners
with it you can
choose an optimum mix of partners who
would offer the best cost of goods or services
services
delete inappropriate suppliers from the
supply chain alter the supplier base
whenever you want to achieve a specific
procurement goal
monitor suppliers performance
vendor development
this is a win-win strategy for you and
the vendors
through close cooperation feedback and
suggestions you can help them develop a
way to offer better or cheaper products
assist suppliers in implementing
processes to get required quality levels
improve cooperation with them and
achieve vital strategic goals with the
help of loyal vendors
global sourcing global sourcing brings
substantial benefits to your company you
can lower costs increase the volume of
produced and offered goods and use
international technology
by choosing this strategy you can
discover and utilize cost-effective
sourcing possibilities in a specific
country or part of the world where
required goods can be produced more
economically however adopting the global
sourcing strategy you should be aware of
the severe challenges it implies
long delivery time complex supply chain
issues of legislative and human rights
the difficulty of monitoring the
production process quality levels and costs
costs
green purchasing
this strategy is a good fit for you if
you're concerned about the environment
and human health it gives you the
possibility to purchase from suppliers
that follow sustainable processes and
offer so-called green items produced
with minimal environmental impact
recycled or recyclable
corporate social responsibility csr is a
company's strategic initiative that aims
to contribute to societal goals
csr compliance principles are being
integrated into contracts at every step
of the procurement process
as a part of csr practice you will audit
suppliers and examine practices in place
such as sourcing raw materials and
producing goods shipping methods work
conditions pay levels etc
total quality management tqm
such a procurement strategy evolves
around an ongoing process of
optimization through discovering errors
and opportunities for improvement using
a tqm strategy you can focus on the
entire transaction life cycle
from selecting goods and services to
invoicing and payment
procurement training if you're looking
for the most important procurement
strategy this is the one you should take
into account to make your procurement
workflow as efficient as possible
consider training the following skills
of your team
hard skills such as the ability to use
specific tools or software
skills of effective negotiations to
maximize the procurement team's
potential ensure the team's alignment
when upgrading procurement practices
how to develop an effective procurement strategy
strategy
once you select the appropriate
procurement strategy it's time to
implement it let's figure out what
crucial aspect you should take into
account at this stage
step 1 assess the current procurement
process and scrutinize the working
ecosystem it's not a secret that all
strategy development starts by
understanding the basics and analyzing
the overall situation
that's why you need to take the
following actions foremost analyze the
current spending culture of the company
identify business units and departments
involved in the procurement process
define inefficiencies
evaluate the total cost of ownership tco
to consider any overlooked costs of
goods and services that are not obvious
upon initial purchase
review weak spots or maverick spending
step 2 determine business needs figure
out current and further business needs
check contracts speak to stakeholders
and procurement professionals to get a
better hands-on understanding of whether
your procurement practices are aligned
with the company's business needs
step 3 conduct market analysis
procurement market analysis will help
you get vital insights and collect
relevant information
monitor market conditions as they might
change rapidly and frequently
pinpoint different market players such
as suppliers and distributors partners
and competitors clients etc
identify the market threats and opportunities
opportunities
step four set clear and specific
procurement objectives
defining strategic objectives is about
balancing desired goals and resources at hand
hand
always ask a what-if question to ignite
a conversation about the businesses
objectives relevance
remember that objectives must be aligned
with the company's vision and global
policy but stay specific and realistic
step 5 convince stakeholders to revamp
procurement strategies
develop your procurement strategy in
collaboration with stakeholders and partners
partners
those involved in the procurement
process should be on board with creating
or revising the strategy and know
precisely how they are expected to
contribute step 6 define procurement policies
policies
review existing procurement policies and
adapt them to current business needs
at this stage you should take the
following actions
identify existing procurement policies
for each department create a list of
preferred suppliers add additional specifications
specifications
make sure that procurement policies are
available to everyone involved in the
purchasing process
step 7 outline a procurement strategy
describe the current situation list
strategy goals and create a tactical
plan for its achievement make sure to
set smart goals when preparing a
procurement strategy
every goal should be
specific define clear goals
measurable identify the needed criteria
to measure results
achievable make sure you can achieve
goals with available resources
relevant check if your goals are aligned
with the company's particular needs
time bound set a clear timeline for
achieving your goal
step 8 implement procurement software
the procurement process is quite complex
and includes multiple steps to be
followed precisely to prevent possible
errors find the appropriate digital
solution procurement software will help
you eliminate manual data entry automate
time-consuming purchasing operations and
boost employment productivity step 9
evaluate human capital and conduct training
training
learn about where your team stands in
understanding ways to achieve
procurement goals and purchasing
processes specifics
organize training and make sure your
team is aligned with the key objectives
of the procurement strategy
step 10 execute evaluate and refine the strategy
strategy
finally it's time to execute the
procurement strategy and no it's not the
end although this is the final step
everything is just beginning it's a
process that must be overviewed analyzed
and measured constantly
always track the following aspects
cost and savings how do prices change
and how are we saving
spend how effectively are we spending
contracts how well are contract
conditions fulfilled
suppliers how efficient is spending per supplier
supplier
competition how high is roi compared to
the market players
processes how efficient is each step of
the processing time and cost wise
customer satisfaction how satisfied are
end customers
even if your procurement strategy
completely satisfies you and affects
your company in a good way don't forget
to analyze the success metrics and
identify areas that can be improved in
the future
review your strategy periodically
take into account factors as market
fluctuations business growth technology
development policy changes etc
ready to simplify your procurement
strategy with cloud-based solution
sign up for a 14-day trial or book a
demo on our website to see how easy the
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