In recent years, the need to develop an effective enterprise procurement strategy has arisen in recognition of the impact procurement has on competitive positioning. Companies that do not develop a comprehensive procurement strategy risk interruption in the supply stream. This interruption might be due to poorly executed product and supplier planning/sourcing, misunderstood environmental and regulatory constraints, and/or uncertainties in price and delivery.
The development of a procurement strategy is influenced by several factors, including the level of sophistication of the corporate planning process. These factors include the enterprise’s dependence on purchased products and services, the perception of the procurement function by top management, the availability of technology enablers, and the evolution of the procurement function from being tactically based to being strategically based. The content of a procurement strategy can vary, but a comprehensive strategy can be developed using a model illustrated in a visual.
Take note of each step in the procurement strategy development process:
Step 1: Strategic Analysis
The planners and buyers are responsible for aligning the procurement strategy with the internal and external business strategies of the company.
Step 2: Organizational Structure
Procurement planners and buyers are mapping the capabilities of their organization to support both internal and external business plans.
Step 3: Inventory Strategy
Individuals responsible for planning and purchasing develop strategies related to inventory, such as spend analysis, new products, make/buy decisions, materials and services classifications, as well as drafting the purchasing budget.
Step 4: Supplier Relations
The buyers are responsible for defining the goals and framework for developing a partnership with suppliers.
Step 5: Technology Enablers
The types and level of connective technologies between buyers and suppliers are determined by the buyers.
Step 6: Performance and Continuous Improvement
The procurement performance standards and the environment required for continuous improvement are determined by the buyers.