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Linda Scott | 23 Jun 2021 | 7 min read
Six Procurement Strategy Recommendations for FY22
Don’t waste time and resources with outdated processes. Be THAT team member and implement winning procurement strategy best practices to improve efficiency in FY22.
Is your procurement team stuck in Groundhog Day?
For most organisations, this involves doing the same procurement tasks day in and day out: fielding urgent stakeholder requests, searching for suppliers, working on endless RFPs, and managing compliance.
In other words, procurement is running on the spot. There never seems to be any time to step away from the tactical workload to spend time on strategic thinking, or work out how the function can grow and evolve.
The answer is to create a procurement strategy that acts as a roadmap for the future, embraces best-practice procurement, and leverages technology to reduce manual processes, supercharge efficiency and free up the team for value-adding tasks.
Here are six procurement strategy best practices to get you started.
1. Marry your procurement strategy to the overall business strategy
Nothing is more frustrating (or expensive) than formulating and implementing a procurement strategy only to discover six months later that you’ve been barking up the wrong tree.
At the most basic level, this involves aligning your procurement strategy, targets, and KPIs with the key focus of the wider business.
It’s easy to get this wrong: for example, a procurement team may expend most of its energy on cost-cutting through supplier consolidation, unaware that the wider organisation’s leadership is focused on risk-reduction (which usually involves broadening the supply base).
If the term “overall business strategy” seems vague or ill-defined at your workplace, it can be helpful to work at the sub-strategy level and focus on aligning the procurement strategy to the organisation’s:
- Recruitment strategy – are your plans to expand the procurement team by 50% realistic?
- Technology strategy – how will planned procurement software investments integrate with the existing and future enterprise tech stack?
- Risk strategy – what is your organisation’s current appetite for risk, and how will this affect your procurement and supply chain strategy?
Top tip: Never assume that wider business strategies are fixed or unchanging. Strategies and areas of focus often shift with the arrival of a new CEO, or in response to changing market conditions and disruptions.
2. Create a procurement data strategy
No progress can be made in terms of procurement technology without first getting your data strategy in order. A procurement data strategy will enable:
- Digital transformation
- Spend visibility
- Spend analytics
- Process automation
- AI and machine learning
- Data-based decision making
Creating a data strategy involves understanding where your data is currently stored – is there a single source of truth, or is data scattered across siloed spreadsheets, email inboxes and standalone tender portals?
Understand and map out your data sources. Where are your systems drawing their information from? Are the sources reliable? Is there manual data entry involved that could be automated?
Next, look at what needs to be done to “clean” or standardise data to the point where it can be used. If this is currently a manual process, look at automating it.
Top tip: Avoid the mistake of simply collecting masses of data for data's sake. Your strategy should show how procurement data will be put to use, and how it will help meet business goals.
3. Automate, automate, automate
Counterintuitively, process automation enables procurement professionals to be more human.
This is because the intelligent automation of manual tasks frees up the procurement team to focus on activities that require the human touch: working with stakeholders, supplier relationship management (SRM), and elevating procurement from the traditional (if incorrect) role of “admin” to being a trusted business advisor.
Which processes can be automated in procurement? Everything. There are process automation software solutions for:
- Procurement planning
- Self-service procurement
- Supplier risk management
- Tactical purchasing
- Supplier information management
- Spend analysis
- Contract management
- Purchase orders
Top tip: Automation requires time and money, so don't attempt to do everything at once. As part of your procurement strategy, talk to your team to understand their process frustrations and prioritise automation accordingly, as you build out your technology ecosystem.
4. Create a great user experience
There’s a danger in decentralised environments that the procurement team finds itself falling into the role of a help desk. Every day they field multiple calls and emails with questions like:
- Do I need prior approval even to go to market for pricing?
- Can you come by my desk and help me use the procurement portal?
- How many supplier quotes am I supposed to source before I can make a purchase?
- Where do I go to order new printer ink?
Think about how much time could be saved if the procurement team no longer had to answer so many user questions. Your procurement strategy should take a two-tiered approach to this.
Firstly, build intuitive and efficient self-service procurement portals with excellent UX to reduce the number of questions asked. “Intuitive” in this scenario means anticipating user needs: for example, if the travel booking system recognises that a user is searching for a hotel outside of the catalogue, this should trigger a pop-up box that explains to the user why they can’t make the booking – thus saving the procurement team a phone call.
Secondly, look for ways to make the Q&A process as self-service or automated as possible. This could range from a simple solution (an FAQ page), or something more sophisticated such as a machine-learning-enabled procurement chatbot.
Keep a finger on the pulse of tech trends to understand how the user experience can be improved and automated. Take voice assistant technology as an example: instead of saying “Hey, Siri” or “Hey, Alexa”, decentralised buyers could one day get their questions answered by saying “Hey, Procurement”.
Top tip: As the workforce is increasingly made up of Millennials and Gen Z, keep in mind that your stakeholders have grown up with highly intuitive digital tools with excellent UX. This means that your systems should be as attractive and easy to use as popular apps.
5. Focus on relationships
Your procurement strategy should enable the building of relationships that create value for the organisation.
With the efficiencies gained through procurement process automation, the team will have more time for:
Stakeholder relationships: Instead of waiting for stakeholders to come to you (reactive), take a proactive approach to establishing and strengthening internal relationships. This will result in an increase in procurement’s influence, getting involved earlier in the planning process, and eventually gaining a seat for the function at the decision-making table.
Supplier relationships: The ultimate goal of a Supplier Relationship Management (SRM) program is to be seen as a “customer of choice” by your strategic suppliers; the top 20% of vendors who you spend the most money with or are essential for business continuity.
The importance of SRM became starkly obvious at the beginning of the COVID-19 crisis when global supply chains broke down and supplies of many products were extremely limited.
Strategic supplier relationships can be managed with a hybrid manual/automated approach. Technology can be used for data sharing, collaboration, and easy payments. But it is best practice to retain the “human touch” for relationship-building activities: negotiation, feedback, nurturing innovation, and more.
Top tip: Treat your suppliers as business partners by inviting them to provide input into your procurement strategy.
6. Move beyond cost savings
Getting strategic in procurement involves broadening the function’s scope beyond cost savings and risk management to embrace sustainable procurement.
Procurement has a crucial part to play as environmental regulations increase and companies recognise the competitive advantage to be gained by building a sustainable supply chain and winning a licence to operate.
Suppliers can be evaluated against several criteria beyond cost and risk, such as:
- Environmental sustainability
- Supporting local jobs
- Employing marginalised workers
- Accreditation with NGOs such as Social Traders and Supply Nation.
Top tip: Automate your supplier discovery to ensure sustainable suppliers are given equal consideration along with large or low-cost suppliers.
Our procurement strategy best practice recommendations
- Marry your procurement strategy to the overall business strategy
- Ensure your procurement strategy remains aligned with the wider business.
- Align your procurement strategy with overall People, Technology, Risk, and other enterprise strategies. Include summary points for each recommendation
- Create a procurement data strategy
- A data strategy will enable digital transformation, advanced analytics, AI, machine learning, process automation and more.
- Ensure procurement data is housed in a single place rather than scattered across siloed spreadsheets and email attachments.
- Document how procurement data will be cleaned and standardised.
- Automate, automate, automate
- Automate procurement processes such as supplier discovery, compliance reporting, contract management, spend analysis and payments.
- Automating manual tasks will free up time for value-adding activities such as Supplier Relationship Management.
- Create a great user experience
- Invest in intuitive UX in procurement portals to reduce the number of help requests procurement receives from decentralised buyers.
- Focus on relationships
- Take advantage of time savings through automation to invest more time in supplier and stakeholder relationships.
- Move beyond cost savings
- Expand the focus of procurement beyond the basics (cost and risk)
- Look for opportunities to add value through sustainable procurement and engagement with local, social, and indigenous suppliers.
To move your procurement function forward in FY22, book a demo with VendorPanel.
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