Procurement Strategy Development
Procurement, by definition, is the acquisition of the materials, supplies, services, etc. that a company or project requires in order to successfully operate.
In these terms, a procurement strategy would refer to the planned approach of cost-effectively purchasing a company’s required supplies, taking into consideration several elements and factors such as the timeline for procurement, the funding and budget, the projected risks and opportunities, among others.
To develop an effective procurement strategy or sourcing strategy, first it is necessary to sit down to assess the details that you have to work with. These details will include the business’ or project’s objectives, the available and existing resources and supplies, the budget and the timeline. Through the assessment of these elements, the team would be able to start planning for an effective procurement strategy that would be as custom-made as possible for the company; the key here is to make sure that every detail of the plan would contribute towards attaining the company’s established goals and objectives. A good question to ask would be, “Why are we purchasing this equipment?” The answer must be in accordance with the company’s goals.
Another key item that would be planned for during this brainstorming stage would be the choices of either making or creating the materials (or doing procurement outsourcing) with the costs and sustainability being the major determining factor, and whether the existing company resources would be able to support the decision over a long period of time.
Supplier Relationship Management
Supplier relationship management, also known as SRM, is a strategic and segmented approach, executed on the entire supply base, to maximize value and minimize risks.
It is a concept that is comparable to customer relationship management, also known as CRM. Whereby a company has nominated dedicated account managers. They manage a number of strategic clients. In their capacity as account manager and within CRM the overall goals are to develop a strong relationship with the strategic clients to safeguard the existing business and to generate more business with them.
SRM on the other hand is about the company managing its entire supply base. The purpose is that this will lead to better cooperation between the company and its suppliers in order to contribute to the company’s business strategy.
The SRM method contains five steps. Given that SRM involves a continuous approach, the team can decide to restart the whole exercise based on the conclusions when they conduct the evaluation step.
Step 1 – Supplier identification: The first step in the SRM method is supplier identification. The company must sort out and identify all its suppliers, to whom they paid invoices over a certain period.
Step 2 – Supplier segmentation: This is an important step. The long list of suppliers to whom invoices have been paid must be segmented. Segmentation helps to find those suppliers that are capable of contributing to the business strategy. Only these, limited number of suppliers are worth the time and effort to build a close relationship and partnership, with.
Step 3 – Relationship analysis: Mainly for the top segment of suppliers classified as interesting to build a partnership with, the company must determine the existing relationship type. This is realized by using the supplier relationship analysis tool.
Step 4 – Relationship management: Mainly for the top segment of suppliers the existing relationship type needs to be managed towards the ideal relationship type, which is the leverage-core relationship type.
Step 5: – Evaluation: On a regular basis the SRM results and lessons learned need to be documented and evaluated. This will lead to a series of recommendations towards the business like integrating the top segment suppliers for new research and development activities or proposing to restart step 2, the supplier segmentation.
Read more about the Competences:
|Strategy Development||Category Management||Finance Management|
|Cost Management||Sourcing Process||Negotiation|
|Legal||Performance & Contract Management||Operational Procurement|