- Procurement Strategy
- Procurement Management
- Procurement Transformation
- Strategic Procurement & Category Management
- Operational Procurement
The procurement strategy – strategic sourcing
When asked, 8 out of 10 CPOs/procurement managers claim that there is a procurement strategy in place. If the same question is asked to budget-responsible colleagues and buyers, then this number decreases to 2 out of 10. It is clear what this means for the sourcing strategy in terms of orienting procurement for the coming year: a strategy which does not arrive at the operational level with well-defined objectives and tangible goals cannot be properly effective.
In this context, questions arise, such as:
- Why is a procurement strategy important?
- What are the tasks of the procurement strategy?
- Is an overarching category strategy missing?
- Is strategic sourcing sufficiently integrated in the company?
- Does the procurement strategy lack innovation and is it not forward-looking?
- Does your procurement strategy ensure the appropriate governance, cost, and performance measurements?
Why is a procurement strategy important?
Depending on the company, external expenditure usually ranges between 40% and 80% of a company´s total expenditure. The procurement strategy is therefore critical to most company’s competitiveness. For this reason, it is important that the procurement department, especially strategic sourcing, contributes to the development of the corporate strategy. Furthermore, the procurement strategy serves as the overarching guide for the daily work of the procurement department. Last but not least, the strategy defines guidelines and tools with regard to external expenditure for the wider organisation, paving the way for efficient cost management.
The procurement strategy typically covers a planning period of 3 to 5 years. It is developed by procurement management and the strategic sourcing department in cooperation with the executive board in accordance with the organisation´s corporate objectives. The status and goals of the procurement strategy are compared with the objectives at regular intervals and adjusted where necessary.
Tasks of the procurement strategy
As procurement derives its goals from the organisation's corporate objectives, the procurement strategy specifies in more detail how these goals can be achieved in the medium and long term. One key element of the procurement strategy is to ensure that the organisation and its suppliers are measured and managed in accordance with its goals.
Another important task of the procurement strategy is to define measures to achieve goals within a comprehensive category strategy. This considers the internal and external circumstances of the categories as well as the availability and capabilities of procurement resources.
In the main, however, the sourcing strategy focuses on answering elementary procurement questions within a changing business environment. These include: make vs. buy; global sourcing; the implications and specification of a mixed supply base; risk management; coordination of both supply and demand within the supply chain; and the exploitation of technological innovations, for example digital procurement.
Is there evidence of a lack of procurement strategy?
The symptoms of a poorly formulated or implemented procurement strategy can be diverse, and in individual cases can have different consequences. Below, we discuss the typical challenges of strategic sourcing in its procurement strategy, and propopose the initial approach to reaching a solution.
Results and added value through a good procurement strategy
When successfully implemented, a good procurement strategy can enhance competitiveness. It can be summarised in 3 main points:
- A strategic plan prescribing how procurement will meet the corporate objectives in the medium to long term, including: concrete measures; goals for the organisational structure; and the positioning of, and innovation within, the procurement department
- Resource-and-result-optimised category management, including: derivation of bespoke strategies; introduction of new and innovative procurement methods and tools; and the identification and definition of savings levers and targets.
- Measurement, control, and management, including: the introduction of targeted measurement and control instruments; and efficient processes for the clearance, management, and handling of all procurement activities.
OCM offers comprehensive support in designing your customised procurement strategy as well as its implementation with strategic sourcing via our comprehensive product offering: Procurement Consulting.
We combine our proven approach for the development of a bespoke procurement strategy with the specifics of your procurement management, the resource requirements for its implementation, and a realistic future orientation in e-procurement.
We would be happy to present to you our approach and product modules, or discuss concrete solutions based on your challenges.
Our project modules at a glance:
Procurement Consulting Modules
Procurement Opportunity Assessment
- Benchmarking & Identification of Opportunities
- Tangible Action Plan for Implementation
External Cost Transformation
- Reduce costs & stop maverick buying
- Procurement Optimisation & Zero-Based Budgeting
Procurement Process Optimisation
- Procurement processes optimisation: fast, cost-efficient, digital
- Trained and invested employees
- Improving compliance
- Procurement Strategy & Cost Optimisation
- Increase quality & prevent maverick buying
Procurement Strategy Design
- Sustainable max. value contribution through optimal procurement strategy
- Reduce costs, optimise procurement processes
BI Cost Reporting
- Consolidated data sources
- Meaningful live analyses
- Fact-based decision making
Procurement Operating Model
- Maximising the value-add of the procurement organisation
- Optimise, measure, & control procurement processes
Training: Strategic Sourcing & Negotiation
- Buyers trained as specialists
- Putting theory into practice and implementing with support
Interim Procurement Manager
- Rapid response: candidates within 48h
- Matching of requirements and assessment of suitability using procurement experts
- From operational buyer to CPO
- Competitive advantages in speed, scope, & significance of information
- Efficiency through automation, data integration, & process simplification
- Procure-to-pay cost reduction
- Fraud prevention
- Efficient Cooperation
- Performance-based Supplier Management
- Cost Optimization
- Bespoke Optimal Insurance Cover