Procurement strategy

What is a procurement strategy?

A procurement strategy is a process that aligns with your organisations overall corporate strategy.
It aims to support the overall business objectives and direction, ensuring that any activity that is undertaken within the operational activities in the procurement department's work towards the overall corporate strategy. Today’s market demands flexibility and innovation.
Organisations must be leaner, quicker, and more proactive to keep ahead of things to avoid being left behind by competitors and customers. A procurement strategy will help you stay ahead of the game.

There are six key values that make up a procurement strategy:

• Vision:
  Set goals, understand the approach, and identify the scope of remit
• Performance metrics:
  You can’t manage what you don't measure.
• Procurement capabilities:
  Identify existing capabilities within the function and changes required
• Stakeholder engagement:
  Keep stakeholders informed and explain the procurement strategy to support buy in
• Business context:
  Create value for customers and improve how procurement is viewed as a function
• Plan of action:
  Break the strategy down into logical steps of deliverables.

Why do you need a procurement strategy?

There are number of issues in today’s business environments, which are challenging. Having a procurement strategy will help confront and address these challenges. Here’s five reasons why a procurement strategy is so vital.

1. Procurement must be linked to the financial planning of the business. The organisation, therefore, needs to develop a way to measure the effects of sourcing and procurement on the business.
2. Organisations must think and act on a global scale, not just in terms of extending supply chains.
3. The decision to make or buy, cannot be made on purely financial terms. A more strategic and wider view must be taken, which considers the overall goals of the organisation and long-term development of the organisation.
4. There must be a balance against what the most crucial core activities of the organisation are and ways to reduce cost and improve efficiency.
5. Mapping how different service or product functions respond to customer needs is crucial. This process is intended to produce a more focused portfolio of products and services and provide indications of areas to build upon in the future.

Procurement strategy advantages

As outlined, a procurement strategy is key in today’s challenging environment. Take a look at some advantages of implementing a procurement strategy within your organisation.

• A procurement strategy is often seen as key to competitiveness and can have a positive effect on performance
• A procurement strategy helps to identify risks within your organisation
• Strategic procurement can achieve a reduction in the supplier base and the establishment of long-term relationships with the best suppliers

Procurement strategy challenges

Any new strategy and change within an organisation, brings some challenges. It’s important that all key stakeholders are on board, however this can sometimes be tricky. Here are some challenges that implementing a new procurement strategy may bring.

• Strategic procurement can increase the risk of heavier dependence upon a smaller number of suppliers
• There are problems with measuring a complex business relationship that is created through a dependence on suppliers