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do you know how your company's roi can grow with a well-structured procurement strategy bet you didn't imagine such a number if your strategy is planned thoughtfully and aligned with the business goals you can expect a 3.8 times higher roi quite impressive isn't it wondering how to achieve similar results and build an effective procurement strategy we are here for you in this video we will cover everything you need to know about procurement strategy development and its implementation let's start from the basics what is a procurement strategy imagine you're planning to organize a birthday party for your friend you should consider quite a lot of things calculate the budget rent a proper place invite guests as well as order catering decorations and presents it's necessary to have a step-by-step plan to prevent chaotic acts and make everything in the best possible way the same thing with procurement management all processes from purchasing to cooperation with suppliers should be well organized to improve operational efficiency and reduce costs with a procurement strategy you can provide visibility for all stakeholders within the chain outline budgets build long-term relationships with competitive suppliers acquire the necessary goods or services in a specific cost range and have them delivered on time [Music] what is the purpose of a procurement strategy if you're wondering why you need a separate strategy for your procurement process the answer will be pretty obvious an effective strategy will help you to allocate efforts and resources in the right way to make your purchasing workflow as beneficial as possible strategic procurement allows you to ensure that the right products are delivered on time obtain well-structured data to prioritize purchases minimize possible risks with suppliers reduce costs and control spending how to select relevant procurement strategies everything starts with the goal if you clearly understand the unique company's objectives you have a clear course to follow there are several procurement strategies that you can implement in your company let's go through each of them cost reduction if you want to increase profits by recognizing saving opportunities and decreasing the total cost of ownership tco this model is the best variant cost reduction is a complex and multi-layered process it's influenced by various decisions made across the company's departments on many hierarchy levels it involves negotiating with suppliers adjusting internal administrative and operational expenses and optimizing specifications risk management giving preference to this strategy you can minimize the impact of unfortunate events on the procurement process this strategy allows you to develop appropriate responses to potential risks core elements of risk management strategy include the following steps monitor and identify the risks understand their origin nature and possible impact prioritize and mitigate risk events based on the impact force on business communicate risk management practices to teams involved in procurement supplier management optimization and relationship building this strategy is about managing suppliers and building relationships with partners with it you can choose an optimum mix of partners who would offer the best cost of goods or services delete inappropriate suppliers from the supply chain alter the supplier base whenever you want to achieve a specific procurement goal monitor suppliers performance vendor development this is a win-win strategy for you and the vendors through close cooperation feedback and suggestions you can help them develop a way to offer better or cheaper products assist suppliers in implementing processes to get required quality levels improve cooperation with them and achieve vital strategic goals with the help of loyal vendors global sourcing global sourcing brings substantial benefits to your company you can lower costs increase the volume of produced and offered goods and use international technology by choosing this strategy you can discover and utilize cost-effective sourcing possibilities in a specific country or part of the world where required goods can be produced more economically however adopting the global sourcing strategy you should be aware of the severe challenges it implies long delivery time complex supply chain issues of legislative and human rights the difficulty of monitoring the production process quality levels and costs green purchasing this strategy is a good fit for you if you're concerned about the environment and human health it gives you the possibility to purchase from suppliers that follow sustainable processes and offer so-called green items produced with minimal environmental impact recycled or recyclable corporate social responsibility csr is a company's strategic initiative that aims to contribute to societal goals csr compliance principles are being integrated into contracts at every step of the procurement process as a part of csr practice you will audit suppliers and examine practices in place such as sourcing raw materials and producing goods shipping methods work conditions pay levels etc total quality management tqm such a procurement strategy evolves around an ongoing process of optimization through discovering errors and opportunities for improvement using a tqm strategy you can focus on the entire transaction life cycle from selecting goods and services to invoicing and payment procurement training if you're looking for the most important procurement strategy this is the one you should take into account to make your procurement workflow as efficient as possible consider training the following skills of your team hard skills such as the ability to use specific tools or software skills of effective negotiations to maximize the procurement team's potential ensure the team's alignment when upgrading procurement practices how to develop an effective procurement strategy once you select the appropriate procurement strategy it's time to implement it let's figure out what crucial aspect you should take into account at this stage step 1 assess the current procurement process and scrutinize the working ecosystem it's not a secret that all strategy development starts by understanding the basics and analyzing the overall situation that's why you need to take the following actions foremost analyze the current spending culture of the company identify business units and departments involved in the procurement process define inefficiencies evaluate the total cost of ownership tco to consider any overlooked costs of goods and services that are not obvious upon initial purchase review weak spots or maverick spending step 2 determine business needs figure out current and further business needs check contracts speak to stakeholders and procurement professionals to get a better hands-on understanding of whether your procurement practices are aligned with the company's business needs step 3 conduct market analysis procurement market analysis will help you get vital insights and collect relevant information monitor market conditions as they might change rapidly and frequently pinpoint different market players such as suppliers and distributors partners and competitors clients etc identify the market threats and opportunities step four set clear and specific procurement objectives defining strategic objectives is about balancing desired goals and resources at hand always ask a what-if question to ignite a conversation about the businesses objectives relevance remember that objectives must be aligned with the company's vision and global policy but stay specific and realistic step 5 convince stakeholders to revamp procurement strategies develop your procurement strategy in collaboration with stakeholders and partners those involved in the procurement process should be on board with creating or revising the strategy and know precisely how they are expected to contribute step 6 define procurement policies review existing procurement policies and adapt them to current business needs at this stage you should take the following actions identify existing procurement policies for each department create a list of preferred suppliers add additional specifications make sure that procurement policies are available to everyone involved in the purchasing process step 7 outline a procurement strategy describe the current situation list strategy goals and create a tactical plan for its achievement make sure to set smart goals when preparing a procurement strategy every goal should be specific define clear goals measurable identify the needed criteria to measure results achievable make sure you can achieve goals with available resources relevant check if your goals are aligned with the company's particular needs time bound set a clear timeline for achieving your goal step 8 implement procurement software the procurement process is quite complex and includes multiple steps to be followed precisely to prevent possible errors find the appropriate digital solution procurement software will help you eliminate manual data entry automate time-consuming purchasing operations and boost employment productivity step 9 evaluate human capital and conduct training learn about where your team stands in understanding ways to achieve procurement goals and purchasing processes specifics organize training and make sure your team is aligned with the key objectives of the procurement strategy step 10 execute evaluate and refine the strategy finally it's time to execute the procurement strategy and no it's not the end although this is the final step everything is just beginning it's a process that must be overviewed analyzed and measured constantly always track the following aspects cost and savings how do prices change and how are we saving spend how effectively are we spending contracts how well are contract conditions fulfilled suppliers how efficient is spending per supplier competition how high is roi compared to the market players processes how efficient is each step of the processing time and cost wise customer satisfaction how satisfied are end customers even if your procurement strategy completely satisfies you and affects your company in a good way don't forget to analyze the success metrics and identify areas that can be improved in the future review your strategy periodically take into account factors as market fluctuations business growth technology development policy changes etc ready to simplify your procurement strategy with cloud-based solution sign up for a 14-day trial or book a demo on our website to see how easy the procurement process can be with procoro you