Building a Procurement Strategy Roadmap for Success

Procurement transformation, although innovative and beneficial, often arises alongside a resistance to change, lack of skills and data issues within teams. It isn't always easy to get everyone onboard, however you can lay the groundwork to make the process as simple as possible, with clear visibility for the team involved.

Let's take a look at how you can develop and implement your procurement strategy roadmap from start to finish and address key challenges you may face along the way, as well as save costs and mitigate risk.

The Foundation of a Successful Procurement Strategy

To put it simply, a procurement strategy is a plan that outlines how an organization optimizes its external spending, manages its various supplier relationships, and maintains streamlined internal processes to support cost-effectiveness and generate efficiency. As modern supply chains become larger and more intricate, strong procurement strategies are needed to minimize any risk and maximize growth and efficiency.

An increasing focus on areas such as sustainability — driven by both regulatory and consumer pressure — is forcing procurement strategies to change. Environmentally friendly practices, such as ethical sourcing or moving towards net zero, are now not just preferred but expected. While this is a welcome shift in global procurement strategy, it's forcing companies to adapt their procurement strategy roadmaps.

And sustainability is just one trend forcing a shift in procurement patterns. Digital innovation — such as the introduction of advanced technologies, like blockchain or machine learning — along with rising geopolitical tensions have also had a significant impact on shaping modern procurement strategies.

Initial Steps in Developing Your Procurement Strategy Roadmap

Your organization's procurement strategy roadmap is what will guide any transformation required — from integrating new technology to expanding to new suppliers. To develop it in a way that will work for your company, there are a few things you'll need to think about before you begin.

First, your procurement objectives need to closely align with your overall business goals. Procurement is just one element that contributes towards overall business success after all. Having this alignment makes sure that key procurement decisions will be made with the priority goal in mind, whether that's maximizing cost reduction or developing more sustainable business practices.

Think about your company's short and long term goals, then identify what goods and services are essential for your business operations. This might seem straightforward, but a thorough assessment can uncover areas where you can consolidate purchases, standardize specifications or negotiate better terms.

Before beginning, set clear procurement objectives, focusing on areas such as cost reduction, quality improvement, fostering innovation and risk management.

Key Elements of a Procurement Strategy Roadmap

One of the most important elements of any procurement strategy roadmap is how you handle your relationships with suppliers. Taking the time to invest in these relationships can lead to better prices, quality, and reliability. All of this will ultimately lead to reduced costs throughout your supply chain, and improved supply chain performance as you increase reliability and mitigate risk.

It's worth doing a deep dive into market analysis to understand the competitive landscape. Identify potential suppliers and analyze their strengths, weaknesses, opportunities, and threats (SWOT). Define clear criteria, such as cost, quality, reliability and service, and make the most of Requests for Information (RFI), Requests for Proposals (RFP) and Requests for Quotations (RFQ) to gather detailed information from a variety of different suppliers. Once you have this information, score and rank suppliers based on your criteria. This analysis will help you spot the best suppliers and anticipate market shifts that could impact your procurement strategy.

Practicing your negotiation techniques is a good way to set yourself up for success when communicating with suppliers. Understand your Best Alternative to a Negotiated Agreement (BATNA) to know your options if negotiations fall through. Aim for win-win agreements that benefit both parties, and ensure that your contracts are clear and enforceable. Good contract management can prevent misunderstandings and disputes down the road.

Using technological solutions has also become an extremely popular method of procurement improvement recently, with eProcurement platforms offering businesses the ability to streamline tasks, reduce human error, and improve efficiency. Integrating these platforms takes more than just purchasing software though, you'll also need to invest in your staff.

Keeping your staff up to date with the latest procurement training can not only help optimize your procurement processes but also lead to the development of a culture of continuous learning. This allows a team to constantly upskill, staying at the top of their field for so much longer. If these are the results your business has been looking for, take a look at our wide range of procurement training courses. We have role-specific courses for every position within the procurement chain to make sure that every single member of your staff has the opportunity to grow and improve.

From Planning to Execution: Implementing Your Procurement Strategy

Once you've identified and developed your strategic goals, it's now time to put them into practice. A brilliant strategy is useless without proper implementation. Develop a detailed implementation plan outlining each step and assign responsibilities, and define Key Performance Indicators (KPIs) to measure the success of your procurement activities. Communicate your goals with your entire team to make sure there's clarity of thought and alignment of everyone with the overall mission.

Develop action plans for each team, with each of those linking back into one overall master plan to achieve each goal. Progress on all of these should be monitored regularly, with areas for improvement or adjustment identified as early as possible through feedback from each team.

Throughout these initial stages, you may run into certain roadblocks, such as general resistance to change from stakeholders or a lack of clear communication from individual teams. A key to solving both of these is to communicate effectively from the top down.

To your reluctant stakeholders, communicate the reasoning behind your overall goals, and how they align with the company's existing strategy, and then take the time to address individual concerns.

With poor team communication, take the time to develop multiple clear channels of communication, and make expectations around how often communication is expected extremely clear.

Don't forget to consider how you will manage the costs of your strategy – this goes beyond just negotiating the lowest price. Consider the Total Cost of Ownership (TCO), which includes purchase price, maintenance, and disposal costs. Look for cost-saving initiatives such as bulk purchasing, supplier consolidation, and process optimization. Develop a budget and forecast future procurement needs to ensure you have a clear financial plan that aligns with your procurement strategy.

Continuous Improvement: Monitoring and Evaluating Your Procurement Strategy

Once you've implemented your procurement strategy roadmap, you'll need to consider exactly how you're going to measure its success over time. Use your KPIs from above, as they give you a strong measure of performance weighted against the organization's goals and expectations. These could be anything from cost savings to inventory turnover — the more specific the better.

Periodic reviews should also be set up to assess progress on a broader scale, allowing you to make the necessary adjustments in response to things like market changes or unexpected issues within your supply chain. Consistent reviews also provide you with benchmarks to measure against over time, giving you a clear view of how your procurement strategy roadmap is faring.

Feedback is also essential here —from internal stakeholders and suppliers — to making improvements. It should be collected regularly and used to drive decision-making in conjunction with the quantitative data collected as part of your reviews.

Future Trends and Innovations in Procurement

As we take a look forward, there are a few notable trends that we expect will have a huge impact on procurement over the next decade:

• Digital tools and AI are changing the face of modern procurement. They allow for advanced predictive models, heavy automation of processes, and enhanced data-led decision-making.
• A massive shift towards more sustainable practices has already happened, but this will only grow stronger as regulatory pressure increases globally. Fines and taxes will continue to be implemented by governing bodies, forcing companies to invest even further in sustainability.
• The skills expected of a modern procurement professional will continue to expand. Already they're required to have extremely diverse skill sets, but the introduction of novel technologies will only force this skill set to grow even wider. Data analysis skills, strategic thinking, and expertise in areas such as sustainability will all soon be requirements.

To stay ahead of the game, get in touch with us to see which areas of upskilling can best help your team.

Achieving Procurement Excellence

A strategic approach to procurement — particularly as the field continues to grow and develop — is the best path for companies to grow and succeed. However, it's important to remember that your procurement professionals will be at the heart of any innovation that takes place. It's never been more important to invest in a skilled, knowledgeable team of procurement and supply chain professionals.

We are perfectly placed to be your partner in developing these skills and knowledge. With over a decade of experience in procurement, our training academies offer the most up-to-date information from world-leading experts in the field.

Get in touch with our team to see how we can help your organization continue down the path toward procurement excellence.