How to Build (or Refresh) a Procurement Strategy in Three Steps
By Hugo Britt | September 16, 2021
Having a procurement strategy creates a vision and direction for the sourcing function. A well-developed strategy provides you with something to work towards and can guide day-to-day decision-making.
In this short guide, we show you how to build a comprehensive procurement strategy in three steps. This process will also work if you’re looking to refresh your existing procurement strategy.
Step 1: Understand the current state of your procurement strategy
You can’t know where you’re going until you know where you currently are. Start by evaluating your current approach to understand:
- What are the major goals and objectives of the current procurement strategy (if any)?
- Is it documented?
- Is it up-to-date or obsolete?
- Is it part of daily decision-making?
- Is it aligned with business objectives?
- Can procurement team members articulate how the project they are working on fits into this strategy?
Understand what is and isn’t working within your current sourcing strategy
The next stage involves evaluating what’s working and (more importantly) what isn’t working when it comes to your current strategy. Reach out to key stakeholders within your organization for their opinions, and be sure to survey the procurement team itself to unearth their ideas for improvement. You may choose to survey your key suppliers as well.
Remember, the goal is simply information-gathering at this stage. Some questions you might ask include:
- What is working well with our current approach?
- What is lacking within the current strategy?
- If you could change something, what would it be?
- How have business needs shifted since the current strategy was written?
- What things do we want to implement if we had more time or people?
- What opportunities are we missing?
- What procurement and sourcing processes aren’t as efficient as they could be?
Step 2: Prioritize your needs
Use the feedback from your stakeholders, procurement team, and suppliers and evaluate it through the lens of how procurement can add value to the organization’s corporate strategy.
Stay aligned by continually asking yourself: How does this procurement activity align to business objectives? Are we concentrating on the right things?
High-level priorities for procurement could include:
Procurement goals versus procurement initiatives
Be careful not to confuse the steps taken to achieve a goal with the goal itself.
For example, implementing new procurement software is not an end goal; it is a method used to boost efficiency, increase visibility, and drive cost savings through the opportunities presented by procurement analytics.
Brainstorm some of the procurement initiatives that you will employ to reach your high-level goals, as demonstrated in the example below.
Drilling down to the significant issues will set you up to create a successful game plan and prioritize your goals. As you strategize, the challenge is to balance prioritizing corporate requirements while addressing any long-term risks, cost savings, and labor-intensive processes.
Step 3: Define how to measure success
Don’t fall into the trap of setting vague or hard-to-pin-down goals and targets. Goals should be “SMART”:
- Specific: Drill down and target specific procurement areas for improvement.
- Measurable: What does success look like, and how are you going to quantify it?
- Assignable: Specify who will have ownership of each goal.
- Realistic: Be ambitious, but realistic given time and resources.
- Time-based: Specify when results can be achieved.
Keep goals, targets, and the steps you will take to get there as simple as possible. The most helpful thing you can do as a procurement leader is to provide a clear vision and definition of success.
Three final pieces of advice on how to build a procurement strategy
Three keys to a successful procurement strategy are to keep it agile, make sure it is used, and reach out for help when required.
Staying agile in a strategic sense doesn’t mean chopping and changing your procurement goals. They remain fixed, but the steps you take to reach your destination can change as circumstances require.
Making sure the strategy is a live document
This is vital. If your team never reviews the strategy and uses it to guide their decision-making, you might as well not have a strategy at all. Remember, these documents aren’t supposed to gather dust on a shelf; they should be in heavy use.
Reach out for assistance
In creating your strategy you may come to realize that you need more resources to reach your goals. In this case, don’t hesitate to reach out to a Group Purchasing Organization for advice. At Una, we work within your procurement strategy to understand your needs and determine how we can leverage our collective buying power to help you meet – and often exceed – your goals.
Need help revamping your procurement strategy or want to find ways to enhance what you already have in place? Reach out to Una to get started.