Procurement of right materials, of the right quality, in the right quantity, and in the right time helps the business to manage the overall costs.
The term procurement strategy refers to the long term planning of successfully acquiring the essential materials in a cost-effective manner from a selected list of vendors who supply good quality products within the stipulated timeline and maintaining the purchasing terms.
Procurement systems mainly focus on the reduction of costs, eliminating risk, and organic expansion. Depending upon the business requirements, organizations can choose to focus as per the priority they have set.
Following are the 7 steps to create a powerful and effective procurement strategy:
>> Analyze Organization Spend: The initial step of developing the procurement strategy is to evaluate the current spend culture of the organization. This should be done by taking into consideration the data from internal stakeholders, vendors who are associated with the procurement procedure.
>> Identify business needs: To develop a procurement strategy, the organization’s primary business requirements must be crystal clear.
>> Define the company goals: The company goals must be specific, measurable, assignable, realistic, and time-bound. The goals here might include an increase in revenue, an increase in sales, etc.
>> Determine the Market Conditions: When the internal analysis is done, move on to the external analysis i.e. analyze the market conditions. This can be done by collecting the data from external suppliers and potential suppliers.
>> Setting Up Procurement Policy: Specify the procurement best practices for every functional department in the organization. This should include which vendors are approved, what sort of purchases need to be approved, and which purchase approval are necessary.
>> Outline and Develop a Digital Procurement Strategy: After collating the information and data, the next step is to outline the digital procurement strategy. Here, the organization must remake the existing procurement strategy, skillset, etc.
>> Execution of the Procurement Strategy: The final step is to execute the strategy keeping in the look the functional departments. The execution helps in tracking and measuring the progress of the procurement process.
