15+ Sample Procurement Strategic Plan

What Is a Procurement Strategic Plan?

A procurement strategy, or strategic sourcing, is a long-term plan that details a cost-effective process of acquiring supplies from vendors that deliver quality products and services on assigned times and dates while abiding with purchasing terms and conditions. The procurement strategic plan depends on several factors like the procurement timeline, budget availability, total cost of ownership, and risk assessment, among others. The purpose of creating a procurement strategy plan is to lessen purchases, mitigate risks, and organic expansion. Strategic procurement utilizes action plans intending to reduce the number of supplier bases, negotiations, and communications to maintain long-term relationships with quality suppliers. Preparing the procurement strategic plan is relevant to suppliers and buyers. For purchasers, it opens up the doors to potential suppliers. Meanwhile, the selling party can take advantage of pressures in the marketplace to increase prices. Strategic procurement also deals with developing IT communication systems, improving procedures and logistics, increasing consumer demands, improving environmental awareness, aligning with transparency requirements, and competing in a dynamic environment.

According to the data gathered by the World Bank from the global public procurement database, global public procurement covers an average of 13 to 20 percent of the GDP. Global expenditure when it comes to procurement has an estimated amount of nearly 9.5 trillion US dollars. With the number of procurement transactions globally, exchanging resources have amounted to a large amount.

Components of a Procurement Strategic Plan

There is no one format for the creation of a procurement strategic plan since different companies utilize the document. However, some essential components must be put into consideration when creating the procurement strategic plan. Since many organizations procure goods and services from other institutions, the document must have the following information for a comprehensive plan. The section below contains the components and their definitions.

Strategy statement: The strategy statement of the procurement strategic plan is similar to a goal statement. It must be an identified goal that aligns with the mission statement, vision statement, and organizational values of the organization. The goal is a broad statement that visualizes an intended outcome. The mission, vision, and values play a critical role in selecting suitable sub-goals. The intent must always interlink with the organization. For example, if the mission of the company is to provide high-quality goods and services to customers, the sub-goal must focus on cutting down costs of production processes and materials without sacrificing the quality of products.Strategic objectives: The strategy statement must have the support of measurable objectives. The strategic objectives must be clear and specific. At the end of the implementation of the strategic plan, two independent individuals can measure whether or not the objectives are achieved. The objectives of the procurement strategic plan must be specific, measurable, attainable, realistic, and time-bound, following the SMART goal-setting procedure. If the strategy statement aims for the reduction of expenses, then the objective must be precise, listing up to what extent the deduction leads.Strategies and tactics: The strategy and tactic section lists the probable steps to achieve the goals and objectives of the strategic plan. The development of strategies must be general and indicate the necessary steps that lead the organization in achieving its purchasing objectives and goals. These techniques must leverage and capitalize on the abilities, strengths, skills, and opportunities of the organization for them to overcome the weaknesses and threats present. A strategy that a company can utilize to cut down on its supply and material expenses is to explore various opportunities to expand the supplier market through participating in consortiums or events. If strategies are plans, tactics are more operational. It represents concrete action plans for particular tasks to support and implement the identified strategies.Measurement plan: Measurement plans are critical to a procurement strategic plan. The criteria must specify and provide adequate and accurate information on the ongoing process towards the completion of the strategies and tactics to achieve the strategic goals and objectives of the procurement strategy plan. To guarantee that the method is doable and actionable that produces the expected results, the company must establish a sense of accountability to personnel implementing the plan. There must also be individuals that monitor the success of tactics and people to write daily progress reports. Through this, positive progress indicates an opportunity to develop strengths and increase focus on ineffective strategies to modify them to the company’s advantage

Goals of Strategic Procurement

Strategic procurement focuses on potential leverages of the organization from insights coming from spending and expenses data, suppliers, and markets that identify new scope for long-term valuation. These goals differ from one organization to another, depending on their strategic goals. For companies and industries to understand strategic procurement, they must be familiar with the goals that come with it. Below are some goals of strategic procurement you can incorporate into the procurement strategy plan.

Cost reduction: The agenda of most procurement strategies centers around cost savings. At present, stakeholders find ways to implement analytics and technology supporting expenses reduction. Strategic procurement serves as the security to break unnecessary and maverick spending, optimize costs, and implement saving procedures. It includes further negotiation methods for better rates from suppliers or bulk purchases.Risk management: There are various risks associated with the procurement process. It ranges from inaccurate data analysis, shipment delays, data errors, non-compliance situations, and poor vendor selection that relates to capacity and quality issues. With the help of planning, focus, and new technologies, the company can go through all of these dangers and prevent them from becoming more eminent issues.Execution speed and insights: Aside from cost optimization and risk mitigation, companies must focus on the future of execution speeds and insights. With the help of technology, organizations have a steady and slow immersion into procurement functions, perceptions into markets and suppliers, and buying behaviors that increase the value creation to stay competitive in the consumer market. Supplier-base management to capture negotiated savings and drive value: Procurement involves supplier relationships. As such, during negotiations, the suppliers have the upper hand in payment terms and maintaining quality relationships. Many organizations must do their best to have positive relationships with suppliers that deliver quality goods at given schedules, especially during moments of struggles and hardships. That is why locating dependable suppliers and maintaining positive relationships with them is a goal for strategic procurement.Procurement innovation: There are plenty of procurement executives and managers who still think that the process of procuring goods and services is risky. Therefore they do not prioritize it to their advantage, resulting in the likelihood of falling behind competitors. The function of procurement focuses on innovation, empowerment, and support for organizational growth. Through negotiation, procurement has the power to shape supplier terms, conditions, and compensation rates influencing business production. Procurement innovation is a useful tool for innovation through leveraging information, measuring and analyzing daily progress, and implementing critical feedback. It allows the organization to learn how to deliver long-term, agile, and innovation-based procurement strategies.Sustainability: With the world facing climate change issues, many advocates put pressure on organizations to find sustainable solutions in daily activities and operations against unethical behaviors with the expectation of building actions against climate change. If consumers find out about a company’s non-compliance with sustainability expectations, it affects the overall organizational value in the future. Organizations must practice sustainability, especially if industry competitors are already implementing such measures.

How To Develop a Successful Procurement Strategic Plan

Creating a robust procurement strategic plan helps a company identify possible saving possibilities, reduce unconventional spending, and guarantee policy compliances. There are different ways to tackle a procurement strategy plan, depending on the organization and industry. Below are the steps in creating a successful procurement strategic plan for your company

  • 1. Analyze Organizational Spending

    The initial step in creating a procurement strategy plan is to analyze what the company buys and its spending pattern in different departments. You can do this by conducting procurement and spending analysis by obtaining information from internal stakeholders, supply partners, and other entities that are present in the procurement process. The spending analysis must be the basis for all work procurement decisions and actions, serving as the foundation for a procurement strategy. An organization can utilize the total cost of ownership or TCO to identify and analyze overlooked or unclassified expenditures in addition to the initial purchase.

  • 2. Determine the Business Needs

    A procurement strategy plan produces the best outcomes through an understanding of current and future organizational needs. Through the needs analysis, the person working on the procurement strategic plan can align and prioritize strategies across other organization functions and business goals. A company meeting or discussion about recurrent activities and questions about obvious spending methods help to reveal possible saving strategies. A category positioning matrix allows the organization to identify business requirements to develop a procurement strategy.

  • 3. Assess the Market Conditions

    After an internal analysis to identify the business needs of an organization, it is time to do an external analysis focusing on supply markets and their status. The data comes from direct suppliers and supplier markets. To guarantee that information is relevant, the company must ensure that the gathered information is always recent. There are different methods that an organization can utilize, including scope analysis and Porter’s five forces.

  • 4. Set Clear Objectives and Define Policies

    After identifying business needs and assessing market conditions, the company must set out a clear vision to achieve. The data from the previous step is the basis to determine the procurement process. Set the information in an order that represents which ones are most impactful. Using SWOT analysis identifies current procurement functions in the organization. After identifying the objectives, create a list of the best practices of procurement the company utilizes. Adapt the existing procurement policy to fit the organizational needs and modify the procurement policy for the organization using the SWOT analysis. The procurement policies established by the company are a means to guide everyone to fair practices involving procurement procedures, including remedies and violations.

  • 5. Outline a Procurement Strategy

    After collecting and analyzing all necessary information, you can now proceed to develop a procurement strategy. It must list down the goals and tactics to achieve these goals. These goals must follow the SMART-goal setting process. The strategic plan must indicate the methods you plan to use to achieve the defined goals while incorporating new ideas to push for innovations and possibilities.

  • 6. Develop Digital Procurement Strategies and Execute, Manage, and Refine the Strategy

    Through data collection from previous steps, you can create a digital procurement strategy through editing or revising procurement technologies, processes, strategies, support systems, talents, and skills. The digital procurement strategy allows organizations to spend time with suppliers to form strategies and deploy resources to obtain outside gains to make procuring easier. After completing the digital strategy, the next step is to execute it. It also demands the involvement of other departments, receiving their feedback to track and measure the progress and success of procurement processes.

FAQs

What are the steps in procurement planning?

There are different steps to keep in mind when initiating procurement planning for an organization. First, the company must identify the need for procuring goods or services then proceed to research possible vendors or suppliers. The next step is to review bids to determine the final supplier, determine the type of contract, and outline risk management procedures. Afterward, the company can start the purchase order process, identify possible project restraints, and contact suppliers for further evaluation.

What are examples of procurement strategies?

There are various procurement strategies that businesses can use for their organization. Some of these include simplifying the supply chain, consolidating supplier lists, including departments in the organization’s supply database, establishing analysis capabilities, and managing risk tendencies.

What is the importance of strategic procurement?

There are different advantages in utilizing strategic procurement in an organization. One of the prominent benefits involves cutting down expenses. It also allows companies to align their sourcing components with business goals to increase efficiency and minimize the presence of risks in the supply chain. It also allows organizations to form positive and long-lasting relationships with suppliers.

Procurement strategic plans are necessary for an organization to regulate the procurement of goods and services that it receives. Having a procurement plan in place helps the company to have an accurate representation of their expenses and formulate possible strategies and tactics to reduce costs while keeping high-quality products for the consumption of the general market. In the words of Confucius, “A man who does not plan long ahead will find trouble at his door.”. Prepare your procurement strategic plans today by downloading the samples available from the article above.