Thanks to advances in technology, many parts of the procurement process can now be automated. This has led many chief procurement officers (CPOs) to shift away from the technical aspects of their jobs and focus more on strategy.
Their primary goal is to ensure that their procurement processes are properly aligned with their organization’s corporate strategy. CPOs strive to make smart decisions that ultimately reduce costs and increase profits.
What is a Procurement Strategy?
Procurement strategy refers to a long-term plan that allows an organization to source or obtain the goods or services they need to operate. It is also known as strategic sourcing or purchasing strategy, and a procurement professional must designe it in a way that satisfies an organization’s unique needs and value propositions.
Who Needs a Procurement Strategy?
While procurement may sound like a boring business function, it’s essential to just about any organization. In fact, LinkedIn Economic Graph Research ranked the Chief Procurement Officer (CPO) position as number 11 on its list of the fastest growing C-suite titles of 2020. Additionally, CPOs experienced 15% growth as a proportion of total C-suite hires in the last year. CPOs are charged with driving efficiencies, solving business problems, minimizing risk, and ensuring compliance.
Procurement Strategy Framework
1. Analyze Expenditure
Next, you’ll need to focus on, and really understand, your organization’s particular needs. You may want to meet with the management team and get their perspective on how the company is currently doing and where it is headed in the future. Don’t be afraid to bring up “what if?” scenarios and question what they may consider obvious. By doing so, you can uncover new opportunities that support your strategy.
3. Evaluate Market Conditions
Once you complete your internal analysis, focus on external factors such as market conditions. For details on market conditions, reach out to your current and prospective suppliers. Just remember to keep your data current at all times or it won’t help you. Methodologies like Porter’s five forces, which analyze your competition, can be a great way to do so.
Jot down the best practices that will help you get rid of any inefficiencies that exist. Take a look at your SWOT analysis to get an idea of what these inefficiencies may be. Then, modify your current procurement policy to meet your organization’s needs. Don’t forget to make sure it is fair and considers all of the key players in the process.
Procurement strategy refers to a long-term plan that allows an organization to source or obtain the goods or services they need to operate.