Isn’t ALL Procurement Strategic?

Hands up if you have the word “strategic” in your procurement job title.

If you do, why? Is it because you deal only with suppliers over a certain spend threshold, or suppliers who represent a particular risk profile? Is it because you’re responsible for categories that have a direct impact on business performance? Or is “strategic” simply a way of flagging your seniority in the team?

Look around and you’ll notice the word used everywhere in the profession. We have strategic procurement, strategic sourcing, strategic supplier management, strategic categories and strategic procurement leaders. 

The term implies that there must also be procurement that isn’t strategic. There must be categories that are somehow less important, activities that are considered tactical, and people who are given responsibility for the bits that supposedly require less commercial thinking.

Here’s my hot take: There’s no such thing as “non-strategic” procurement. And if you don’t believe a particular sourcing event is strategic, you’re probably doing it wrong. 

Tactical Doesn't Mean Unimportant

We tend to talk about strategic and tactical procurement as though they sit at opposite ends of a spectrum:

• Strategic procurement is about the long term, major suppliers, significant spend and important business decisions. 
• Tactical procurement is about the immediate requirement, the purchase order, the smaller supplier and the day-to-day stuff.

Strategic work goes to experienced procurement professionals, while tactical work often gets passed down to people who are newer to the profession. There is a practical reason for doing some of this. Junior procurement professionals need opportunities to learn, and giving someone responsibility for a relatively straightforward category can be a sensible way to build experience. 

The problem comes when “tactical” becomes a synonym for unimportant.

Imagine being a junior procurement professional and being told that your first category is not especially strategic. The message you may hear is that this spend does not matter very much and that sophisticated thinking is unnecessary. You are learning procurement, but you are also learning how the organization values different kinds of procurement work.

Tail Spend and Indirect Procurement

Every category can be approached strategically.

Take tail spend. It is often regarded as the classic example of non-strategic procurement. Lots of small suppliers, lots of low-value transactions, and fragmented purchasing. It can feel like procurement’s junk drawer, full of purchases that nobody has the time to organize properly.

Instead of looking at each small transaction individually, procurement can look for the patterns underneath it: 

• Why are there so many suppliers? 
• Why are mavericks buying outside your preferred suppliers? 
• Where is demand fragmented? 
• Are there opportunities to consolidate suppliers or standardize specifications?
• Could purchasing channels be improved? 
• Are there categories where a small amount of strategic intervention could eliminate a large amount of transactional activity?

The individual purchase might be tactical, but the way the organization manages the thousands of purchases sitting behind it can be highly strategic.

The same applies to indirect procurement. Indirect categories have often struggled for attention because they do not always have the obvious connection to production or revenue that direct materials do. Yet organizations spend enormous amounts across facilities, cleaning, uniforms, office supplies, technology services, travel, waste, packaging and all sorts of other indirect categories.

There can be huge numbers of suppliers, significant fragmentation and plenty of opportunities to improve commercial outcomes.

The question is therefore not whether each individual category is important enough to warrant the title “strategic”, but how the procurement function should manage those categories to create the greatest value.

Strategy Can Mean Choosing the Right Partner

That might mean taking direct ownership of a category and developing a detailed sourcing strategy, consolidating demand across the organization, changing specifications, reducing consumption, or introducing better buying channels.

Or it might mean working with a partner, such as a GPO like Una.

GPOs provide a way of applying strategic thinking to categories that an internal team may not have the capacity to manage intensively.

A GPO uses aggregated demand across members to negotiate supplier agreements, provide access to pre-negotiated contracts and bring category expertise into areas that might otherwise remain fragmented or unmanaged.

Procurement Automation is a Strategy

Procurement is increasingly using technology to automate tasks that have traditionally consumed large amounts of time, such as processing documents, analysing spend, managing supplier data, monitoring compliance or handling repetitive purchasing activity.

Does “automable” mean “non-strategic?”

A procurement team that uses AI to reduce several hours of manual administration is making a strategic decision about how its resources should be used. Human expertise can then be directed towards supplier relationships, negotiations, demand management, risk assessment, business partnering and commercial decision-making.

The automation becomes part of the procurement strategy because it changes what the team is capable of doing with its time.

So, What Counts as Strategic Procurement?

Again, strategic procurement is less about the category itself and more about the way we approach it. A million-dollar sourcing project can be handled badly. A $10,000 category can be managed brilliantly. A highly experienced procurement professional can spend a week doing something that should have been automated, while a junior colleague can identify a structural problem in a supposedly low-priority category that nobody else had noticed.

Instead of asking whether a category is strategic, ask whether we are approaching it strategically. Are we thinking about:

• The business need behind the spend? 
• The total opportunity rather than the individual transaction? 
• Unnecessary complexity? 
• Supplier risk, market dynamics and future requirements? 
• The right operating model? 
• Using technology where it adds value? 
• Where (human) procurement expertise can have the biggest impact?

Bring Strategy to Your Indirect and Tail Spend

Indirect and tail spend can represent some of the biggest opportunities for procurement teams, but they can also be among the hardest areas to resource and optimize.

Una can help you bring a more strategic approach to those categories, combining GPO buying power, supplier relationships and category expertise to help uncover savings and improve the way your organization buys.

Want to bring strategy to your indirect and tail spend? Contact Una to discuss what that could look like for your procurement team.