Sourcing and Procurement
Five Key Elements of a Successful Procurement Strategy
Once viewed as a transactional function focused solely on purchasing goods and services, procurement has emerged as a strategic business operation that can create significant value for organisations. As businesses worldwide recognise the critical importance of procurement in driving success and competitive advantage, the global procurement software market is set to be worth $9.5 billion by 2028.
Given the increased competition and market uncertainty, having a well-defined procurement strategy has become more crucial than ever for businesses wishing to remain profitable. An effective procurement strategy goes beyond the traditional approach of acquiring goods and services; it involves developing a plan that aligns with your organisation's goals, optimises costs, mitigates risks, and builds effective supplier relationships. *
Why your business needs an effective procurement strategy?
Having a clear procurement strategy is crucial for any business to operate efficiently. Without one, a company may have inconsistencies in procurement, leading to higher costs, supplier relationship issues and higher operational risks. Here are some reasons why your business needs an effective procurement strategy:
A well-crafted procurement strategy can help mitigate risks by enforcing quality, delivery, and ethical standards on suppliers. This minimises the chances of supply chain disruptions, allowing you to safeguard your reputation and sustain business operations.
Having a clearly defined procurement strategy can assist in cost optimisation by recognising potential cost-saving opportunities and negotiating better prices with suppliers. By taking advantage of your purchasing influence, you can attain economies of scale and decrease procurement expenses without compromising the quality of goods and services.
Improved supplier relationships
A procurement strategy can enhance your relationships with suppliers by establishing shared goals and expectations. Collaborating closely with your suppliers can help you gain a deeper insight into their abilities and constraints, enabling you to make more informed procurement choices and secure favourable contracts.
Implementing a procurement strategy can assist in pinpointing novel suppliers offering innovative products and services that give you a competitive edge. Through a partnership with suppliers, you can develop new products and services tailored to the demands of your customers, thus propelling business growth.
Key elements of an effective procurement strategy
A successful procurement strategy should enable your procurement team to procure goods and services as economically and efficiently as possible. Incorporate the following elements in your procurement strategy to ensure its success:
Clear objectives and goals
A successful procurement strategy establishes clear objectives and goals that are aligned with the organisation’s broader objectives. These objectives should be specific, measurable, attainable, relevant, and time-bound and should be communicated throughout the organisation to ensure all stakeholders are aware of the procurement goals. Clear objectives and goals equip procurement teams to focus their efforts on achieving desired outcomes and enable tracking of procurement performance to facilitate continuous improvement.
To develop a successful procurement strategy, you must have a comprehensive plan. This plan should align with your organisation's goals and objectives while taking into account your unique business needs and market trends. It should also involve a detailed analysis of your current spending, supplier relationships, and risk profile. By starting with strategic planning, you can ensure that your procurement strategy is grounded in data-driven insights and geared to deliver results.
To improve efficiencies of procurement strategies, the utilisation of tools and technology is crucial. Procurement software and e-procurement platforms can automate manual tasks, streamline procurement workflows, and offer real-time data and insights for informed decision-making. By using such tools, organisations can increase their procurement efficiency, decrease costs, and enhance collaboration with suppliers. For example, an ERP tool can minimise errors from manual data entry and optimise procurement management.
Comprehensive supplier management
A successful procurement strategy prioritises supplier management, which involves selecting the right suppliers, negotiating favourable contracts, monitoring supplier performance, and fostering collaboration. Strong supplier management practices help organisations establish productive and long-lasting relationships with their suppliers and gain a deeper understanding of their capabilities, strengths, and weaknesses. It also facilitates better risk management, improved quality control, and greater cost savings.
Robust risk management:
An effective procurement strategy can significantly benefit from a well-developed risk management and mitigation plan that acknowledges and tackles potential risks. This involves closely monitoring potential risks, preparing contingency plans, and enforcing preventative measures. Taking a proactive approach to risk management can help organisations maintain a continuous supply of goods and services, minimise quality concerns, and ensure regulatory compliance.
How can Infosys BPM help?
Infosys BPM offers comprehensive end-to-end services for outsourcing procurement strategy to manage risks, improve sustainability, and enhance user experiences. Combining our specialist expertise, experience, and technology – we help propel our clients towards their procurement transformation vision by developing client capabilities, creating effective procurement strategies and planning and roadmaps for innovation, designing operating models, and handholding them during the change process.
Our procurement strategy framework includes solutions such as:
- Procurement transformation and strategy development
- Technology assessment and digital procurement strategy creation
- Spend analytics
- Opportunity assessment and diagnostics
- Capability assessment, consulting, and training
* For organisations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed organisational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like living organisms will be imperative for business excellence. A comprehensive yet modular suite of services is doing precisely that. Equipping organisations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organisations that are innovating collaboratively for the future.