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Procurement Strategy

The document outlines the key elements of a procurement strategy. It discusses developing category and company strategies, managing costs, sustainability goals, supplier performance, purchasing processes, and contract management. The strategy considers objectives like risk management, optimization, and relationships to guide an organization's acquisition of goods and services.

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pratik sharma
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592 views6 pages

Procurement Strategy

The document outlines the key elements of a procurement strategy. It discusses developing category and company strategies, managing costs, sustainability goals, supplier performance, purchasing processes, and contract management. The strategy considers objectives like risk management, optimization, and relationships to guide an organization's acquisition of goods and services.

Uploaded by

pratik sharma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
  • Procurement Strategy Overview: Defines a procurement strategy as a comprehensive plan guiding an organization's approach to acquiring goods efficiently.
  • Category Strategy Development: Explains detailed strategy development steps including market analysis, supplier evaluation, and risk assessment.
  • Cost Management: Illustrates methods for achieving cost savings, managing expenditures, and reducing procurement cycle times.
  • Company Strategy Alignment: Discusses how procurement goals align with company strategy and operational goals, influencing overall business objectives.
  • Sustainability and Ethical Procurement: Covers the integration of environmental and social metrics into procurement processes to ensure sustainability.
  • Supplier Performance: Evaluates the performance of suppliers based on time, quality, and compliance metrics to ensure contract adherence.
  • Purchasing Process: Outlines procedural steps for purchasing, from identifying needs to negotiating terms and documenting contracts.
  • Contract Management: Describes how to manage contracts effectively, focusing on compliance, loyalty, and coverage aspects to protect company interests.
  • Supplier Management: Discusses managing suppliers through diversity, risk scores, relationship indexing, and collaborative partnerships.
  • Conclusion and Acknowledgments: Concludes the document by thanking the reader and summarizing the value of strategic procurement efforts.

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The Procurement Strategy


A procurement strategy is a comprehensive plan or framework that an organization
develops to guide its procurement activities. It outlines the organization's approach
to acquiring goods and services to meet its needs while achieving specific
objectives. A procurement strategy typically considers factors such as cost
optimization, risk management, supplier relationships, and sustainability goals.
Here's a basic outline of what a procurement strategy entails:

Category Strategy
Development

Cost Management Company Strategy


Alignment

Procurement
Sustainability and
Ethical Procurement
Strategy Contract
Management

Supplier
Performance Purchasing
Process

Procurement Strategy
Development

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Company Strategy Alignment

01 Link Procurement Goals to


Company Goals 03 Monitor & Report on
Procurement's Contribution

02 Strategic Planning & Integration


-It is important here to ensure alignment 04 Adjust & Align Strategies
as Needed
with category end user leader’s goals

Category Strategy Development

01 Category Analysis & Assessment


inclusive of spend analysis 06 Cost Analysis & Optimization
02 Market Research 07 Risk Assessment & Mitigation
03 Supplier Market Evaluation 08 Sustainability & Ethical Considerations
04 Category Strategy Formulation 09 Category Strategy Approval
05 Supplier Segmentation

Cost Management

Cost Savings: Spend Under Procurement Cycle Time:


Measure the cost savings achieved Measure the time it takes to complete
through procurement activities Management: procurement processes, aiming for
compared to the baseline or Calculate the percentage of total efficiency improvements.
industry benchmarks. spend that is actively manage and
controlled by the procurement function
and, if appropriate, by Category for
use in category dashboard reporting
and for Supplier Diversity reporting.

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Sustainability and Ethical Procurement

Carbon footprint Water sources protected


Sustainability Metrics:
Track environmental and social impact Diverse Supplier Forest lands protected
metrics.
Economic Impact

Supplier Performance

Supplier Performance:
valuate supplier performance based on criteria like quality, on-time
delivery/lead-time adherence and adherence to contractual terms.

Contract Compliance:
Ensure that contracts with suppliers are adhered to and that
deviations are Communicated internally and minimized.

Procurement Strategy Development

01 Align with Category Strategy 04 Procurement Technology & Tools


02 Supplier Relationship Management
(SRM)
05 Continuous Improvement
03 Performance Metrics & KPIs 06 Procurement Strategy Approval

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Purchasing Process

01 Identify Need 08
Facilitate new supplier onboarding
per system requirements
02 Define Requirements
09 Purchase Order (PO) Creation
03 Supplier Identification
10 Goods/Services Receipt & Inspection
04 Request for Information (RFI)
Request for Proposal (RFP) or
11 Invoice Verification & Approval
05 Request for Quotation (RFQ) 12 Payment Processing
06 Supplier Evaluation & Selection 13 Record Keeping & Documentation
07 Negotiate Terms & Contracts

Contract Management

Contract Compliance Rate (%)


Ensures that contract pricing is consistently maintained across buyers and suppliers, ensuring that
suppliers adhere to agreed-upon pricing, and internal stakeholders within your organization buy on
contract (aka Maverick spend).
Percentage by category of spend under contract /total spend by category
-$ value of maverick spend by contract for each category

Percentage of total spend under contract/total spend


-$ value of contract benefits not realized due to contract non-compliance
-$ value of contract benefits not realized due to supplier
-$ value of contract benefits not realized due to internal issues

Contract Loyalty (%)


Indicates the total procurement spend where a contract exists relative to the overall purchase
volume. It provides insight into the extent to which contracts cover procurement expenditures.

Contract Coverage ($)


Indicates the total procurement spend where a contract exists relative to the overall purchase
volume. It provides insight into the extent to which contracts cover procurement expenditures.

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Supplier Management

Supplier Diversity:
Monitor and increase the diversity of your supplier
base to promote inclusion and reduce risk.
(Track # of match making meetings held by Categories of spend and
value of contracts that result.)

Supplier Risk Score:


Assess and track the risk associated with each supplier to
mitigate potential disruptions.

Supplier Collaboration:
Measure the level of collaboration and innovation
achieved through supplier relationships.

Supplier Relationship Index:


Calculate an index that combines various supplier
related KPIs to provide an overall view of supplier
performance.

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www.procurementleague.com The Procurement Strategy www.procurementleague.com @procurementleague A procurement strategy is a
www.procurementleague.com @procurementleague Category Strategy Development Cost Analysis & Optimization 06 Risk Assessment &
www.procurementleague.com @procurementleague Supplier Performance Supplier Performance: valuate supplier performance based on
Purchasing Process Identify Need 01 Purchase Order (PO) Creation 09 Define Requirements 02 Goods/Services Receipt & Inspec
www.procurementleague.com @procurementleague Supplier Management Supplier Diversity: Monitor and increase the diversity of yo

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