How to develop a procurement strategy in six steps?
How to develop your procurement strategy
A strategy is a plan of action that is designed to achieve a long-term aim or objective. A procurement strategy typically takes 2-5 years to develop, so ensuring you get it right from the off will help to mitigate any risk. To ensure the strategy is successful you need to consider:
- Stakeholders are properly engaged in developing the strategy.
- Understand the industry and business context that the function will operate in.
- Confirm the metrics that will be used to measure progress/success.
- Confirm the scope of services/capabilities required to deliver these outcomes
The six steps for a successful procurement strategy
We share six key areas, that incorporate the four things mentioned above to help you develop your strategy. These six areas are:
1. Business context
Scope out your competitors. What are they doing? Where do you sit in the marketplace compared to them? When you understand your market, you’ll help to improve perception by creating more value for your customers. Decide if you want to support growth, reduce cost, or drive innovation.
- Industry insights
- Business strategy
- Business structure
- Business culture
2. Stakeholder engagement
Discussing your procurement strategy in the right ways with the wider organisation and stakeholders can help ensure you haven’t missed anyone out. You need to understand who the stakeholders are and deal with any concerns they may have. A successful strategy requires a collection agreement between:
- Executive team
- Functional heads
- Whole organisation
- External stakeholders
3. Vision
It’s important that you have a clear vision of what you wish to achieve. Do you want to cut down waste by 80%? Are you looking to cut costs? This vision should be a clear statement for current and future decisions. As early as possible, clarify and define what success looks like to your organisation, identify:
- Goals
- Approach
- Scope of Remit
4. Procurement capabilities
Think about your procurement team and establish their capabilities. A strategy cannot be implemented without the support of everyone.
- Strategic sourcing
- Purchase to Pay
- Supplier Relationship Management
- Supply chain governance
5. Plan
A strategy cannot be implemented without a plan. Think about the long-term view and break your strategy down into logical steps. Such as technology, process, people and data and any limitations that may arise. A typical procurement strategy takes 2-5 years, so ensuring the right timelines are in place is essential.
- Overall timelines
- Developing workstreams
- Creation
6. Performance
There are many different performance metrics to think about when developing your procurement strategy. The key is to think about the difference between metrics that measure efficiency and those that measure any strategic outcomes you want to achieve. The most common framework is using a balanced scorecard which assess performance in the below four areas.
- Commercial
- Risk
- Spend Control
- Supplier Management
What is procurement?
Procurement involves the buying of goods and services that enables an organisation to operate their supply chains, in a profitable and ethical manner. Explore deeper into how procurement is defined, the role it plays and a how a career in procurement can benefit you.
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