What are procurement strategies?

Procurement strategies are the plans and methods that an organization uses
to procure goods and services. These strategies help organizations get the best
value for their money while maintaining quality standards. They encompass
the methods and approaches you can use to find suppliers, negotiate prices,
and ultimately make purchases. It's important to have a strategy to help you
save time and money and ensure that you get the best possible value for your
purchases. There are many strategies that businesses can use. Choosing the
right one depends on several factors, including the type of goods or services
it needs, the size of the business, and the budget.

Purpose and Types of Procurement Strategies

The direct reasons for the implementation of Procurement strategies include:

1. Making sources available for production

2. Minimizing the cost of production
3. Evaluating the performances and effectiveness
4. Maximizing quality of goods produced
5. Automating the process through tools and software
6. Build connections with the stakeholders associated with the process.
7. Ensuring products are delivered on time.
8. Enabling growth mutually
 An organization can opt from the list of a few common types of procurement strategies:

1. Cost Reduction
2. Risk and Supply Chain Management
3. Green Purchasing
4. Global Sourcing
5. Total Quality Management

1. Cost Reduction

Cost reduction strategy involves cost savings in the overall production process that includes
negotiation of terms, administrative and operational expenses, automated tools, and
intelligent use of data.

2. Risk and Supply Chain Management

Risks can be both businesses as well as environmental risks. In this strategy, the organization
aims to supply products at advantageous prices that can be compensated for.
3. Green Purchasing

Green Purchasing strategy heads towards the motive of 'GO GREEN.' It highlights the use of
recycled and purchasing products for a balanced environment

4. Global Sourcing

Global Sourcing is a strategy used to efficiently source goods and services that can be
economically produced in a particular country.

This will help to reduce risks and see the business as an open and global market.

5. Total Quality Management

Quality Management strategy directly heads towards managing the business and its
counterparts like vendors, suppliers who supply quality service without any scope of error.

8 step guides to building your Procurement Strategy:

An effective procurement strategy requires the alignment of
business goals and keeping the flow smooth and running.
Following is the eight-step process to build your procurement strategy:

1. Evaluate your business at present

2. Analyze and assess market conditions
3. Set and define company goals
4. Define Procurement Policies
5. Discuss with the stakeholders
6. Invest in the software and tools
7. Outline and develop strategies
8. Execute and implement right

1. Evaluate your business at present

The first step towards building a strategy is to know about the current operations and state of
the business. It is necessary to determine the needs, processes, future procedures, risks, and
challenges to which a company can look forward. It will also help to evaluate your weak areas
for improvement and guide you in the right direction.

2. Analyze and assess market conditions

After the detailed analysis of the business, it's crucial to analyze and assess the market
conditions and likely situations in the future. It includes necessary data related to suppliers,
vendors, and so on.

The step also involves identifying opportunities and aligning them with your policy.

3. Set and define company goals

Once the business is done with its evaluation and analysis, the next step is to identify the
business's current set of procurement functions. A well-defined goal includes A-Z about
company purchase and deadline processes.
4. Define Procurement Policies

The most crucial step comes here, to create a list of best procurement practices. Whether to
mold the previous one or create a new one, the strategy should fit the organizational needs.

The guidelines should be inclusive of fair practices and positive play to the people involved in
the process.

5. Discuss with Stakeholders

Before creating a procurement policy, it is recommended to take inputs from everyone who is
a part of the procurement process and understand your goals and policies.

It will help to reduce the production time, lighten the workload and eliminate unnecessary
processes.

6. Invest in the software and tools

Investing in procurement software and tools helps the business avoid issues like errors,
delays, and payments. With the help of software, an organization can automate routine jobs
like approvals, invoices, inventory tracking that can enhance the business's productivity.

7. Outline and develop strategies

Now you have everything that you need to build a procurement strategy. The strategies
should include everything related to delivery, quality, time, compliance of rules and
regulations, objectives, vendor list, supplier list.

In short, everything influences purchasing and production decisions.

8. Execute and implement right

Once the plan is shared, the next and final step is to ensure the execution and
implementation of the procurement process based on the strategy. For measuring the
progress, businesses should set metrics and adjust accordingly to enhance efficiency.

The metrics can be set according to business objectives like cost reduction, efficient delivery
schedule, error reduction, or contractual terms.