How Strategic is your Procurement Strategies ?
By Steven SH Yeo, Trainer for Procurement Management
Procurement role in any businesses is to ensure sufficient supplies of material and services in order for the company to run it operation efficiently. However, a more important role hidden underneath is to ensure businesses are staying in competition and able to challenge the market with the best cost.
Businesses are in the industry for the purpose of achieving a reasonable market share and provide a return of investment to it owners. Procurement task is to ensure the goals of the company are met through efficient purchasing of material and services.
How strategic are your procurement strategies in order to ensure these roles are carrying out effectively? In order to have a strategic focus, procurement system need to be broken down into the buying and the managing function. Buying function, commonly known as purchasing is where goods and services are purchased based on need and involve very little long term planning. Purchaser will normally send out inquiry for a quote, choose the supplier, and issue the purchase order and following up on the material delivery.
Procurement is the managing side of the operation of purchasing and this required long term planning. Strategic planning in procurement will normally nothing less than 24 months and beyond and clear goals are put in place. Example of such goal will be to ensure continuous supply of strategic material even during a pandemic, having a cost reduction of material cost for certain parts through aggressive sourcing of new vendors to getting all suppliers ability to perform to company key matrix. Compare to tactical strategies which are mainly “battlefield strategy”, which are extremely focus to short term needs, strategic strategies are geared more toward winning a war. In summary, the tactical strategies can be the objectives to meet the goals set for procurement management.
Strategic strategies required company to understand the long term business goal and understand the current and potential future market condition. There is a need to carry out a competitive study based on the company place in the industry and identify the core weakness or strength in current set up and set up a path toward strengthening the company footing. Putting in place suppliers’ management strategies and together with sourcing strategies can achieve the desire result for procurement to meet long term challenges.
Please join our training program Strategic Procurement and Inventory Management System with Introduction to Contract Management to learn more.