Procurement strategies are a crucial part of your overall business plan. They affect spending across all departments in your business. This is why we've compiled this short guide to creating a successful procurement strategy.

Procurement - explained

Procurement refers to the acquisition or purchase of goods or services at a large scale. This means your procurement strategy describes how your organization approaches this.

Developing your business's procurement strategy

Dedicated procurement teams can help streamline your business's procurement performance. You can also make use of tools such as procurement software to improve the processes and possibly reduce procurement costs.

When developing your effective procurement strategy, there are some crucial elements to be included:

• Internal needs: Undertaking an internal analysis of the status quo of procurement within your company can help you understand what’s working and what needs improvement. Consult your team on how current procurement processes impact their employee productivity and what could be improved. Consider wider business goals and any ambitions or growth when determining your business's internal procurement needs.
• Market analysis: A relevant procurement strategy must be based on research on the market. This can help determine the most viable suppliers and make your supply chain better and more efficient.
• Priorities for your business: Make sure you or your chief procurement officers have a good understanding of which of your company's purchases are most important.
• Procurement policies: Ensure to have a procurement strategy framework with clear processes and responsibilities. Ensure your procurement policies define the purchase approval process, which kinds of purchase should require pre-approval, and who needs to grant that approval. It is also advisable to define what you as a business expect from a potential supplier.

• Review suppliers: Review potential suppliers and conduct thorough research on their credit reports, financial statements, and other references. Choosing the right suppliers is crucial in achieving your goals.
• Final strategy: Defining your procurement strategy, based on what you need and the suppliers you are considering, will help determine whether you will eg only send Requests for Proposals or Requests for Quotes to multiple suppliers or whether you want to form a more substantial strategic partnership with a supplier.
• Conversation with bidders: Ensure you enter into a conversation with bidders before you make a final decision. Test out whether they can help you achieve your company's objectives.
• Ensure a smooth transition: Once you have decided on a supplier to use, ensure a smooth transition by preparing everyone in your company.
• Assess your new purchases: Ensure you monitor how successful your procurement policy was once the purchase was made. It is advisable to regularly monitor and report the performance of your new supplier against KPIs.