How To Develop an Effective Procurement Strategy

First of all, what is the definition of a procurement strategy? 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, it is necessary first 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.

Planning for the most effective procurement systems (or the method of procuring the supplies or technology) should include looking for suppliers not only on the basis of which would give the cheapest and most inexpensive deals, but also which supplier would be most reliable and would offer the best quality within a reasonable price range (not necessarily the cheapest one). It is highly recommended that you forge a strong, long-term relationship with your suppliers, so that over time they learn to meet your precise company standards and that better deals are made between their company and yours. Of course, know that there are many options for procurement contracts that you can work with, depending on your company's needs: there are traditional, long-term contracts; renewable contracts; electronic procurement (via the Internet); and framework agreements, among others.

Another key factor is the procurement solution's sustainability over a long period of time. What are the major determining elements of this? That would include first and foremost, health and safety considerations (such as whether the new materials and technology to be procured have passed standard tests on health and safety); the company's ability to maintain this equipment; whether the equipment, the proposed procurement systems and the procurement service comply with national and local regulations; and a projection of the costs of running the technology over time (ex. electrical consumption, maintenance costs, etc). The key question here is, "Would the long-term benefits of purchasing these materials outweigh the initial costs?"

Once you have made the initial planning and documentation, it is highly important that your company's board and top management would back the procurement strategy that you have conceptualized. Their funding is essential to the implementation of your procurement solutions, plus the whole company (and not just the purchasing department) needs to work together in order to carry out the long-term procurement processes.


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