9 Easy Steps to Creating a Strong Digital Procurement Strategy

In the next five years, 75% of CPOs expect to implement a digital procurement strategy. The procurement community’s top notion of interest is “procurement strategy.” However, developing a solid and pertinent procurement strategy is far from simple.

What is a procurement strategy?

The phrase “procurement strategy” describes a long-term plan to affordably obtain the required supplies from a list of effective vendors who will deliver high-quality items on schedule while adhering to the purchase terms. A procurement plan typically depends on a variety of variables, including the timetable for the purchase, the budget that is available, the total cost of ownership (TCO), potential hazards, and more.

The main objectives of procurement strategies frequently include ways to cut costs, minimise risks, and grow organically. Cost reduction is the top priority procurement approach for 78% of CPOs worldwide, according to a recent poll. Depending on their business needs, organisations can decide to concentrate on one priority or several. 

Various procurement techniques

There are a few standard forms of procurement strategies that can be used by any organisation, regardless of size. As follows:

• Cost-cutting
• Management of risk
• Management and optimisation of suppliers
• Eco-friendly buying
• Worldwide Sourcing 
• Total quality control

How to develop a successful procurement plan

A solid procurement plan will reduce mistakes, identify areas for cost savings, get rid of erratic spending, and guarantee policy compliance. The following are the nine essential steps to implementing a successful procurement strategy:

1. Introduce purchasing software

Due to human error, delays, and late payments, businesses that handle the procurement process manually are more likely to spend more money overall. By removing manual data entry and related inefficiencies, procurement software like eSmart Procurement Cloud increases staff productivity and decreases errors. The entire procure-to-pay process is made more efficient as a result. eSmart Procurement Cloud, which is packed with best-in-class capabilities, assists in locating and fixing process flaws as well as enforcing policy compliance without the need for user intervention.

2. Examine corporate spending

Analysing your organization’s current spending culture is the first step in creating a procurement plan. You must collect information from internal stakeholders, suppliers, and all other procurement process participants in order to do this.

The information gathered in this step will be used as the cornerstone of your organization’s procurement strategy in addition to serving as a knowledge base. To discover and analyse the frequently disregarded or hidden costs that an item or service incurs in addition to its initial purchase price, employ tools like total cost of ownership (TCO). You can view the webinar we’ve created to learn how to manage organisational spending.

3. Identify business requirements

It’s crucial to have a comprehensive understanding of your organization’s requirements in order to build a solid procurement strategy that delivers the greatest outcomes. You may prioritise and connect your procurement strategy with other business goals and functions using this fact-based analysis.

Many additional opportunities for savings will be revealed by a straightforward “what if” dialogue that examines the apparent and challenges the established quo. Organisations can identify the important business requirements that will shape the development of their procurement strategy with the aid of tools like a category positioning matrix.

4. Evaluate market circumstances

The next logical step is to examine the external side of things, specifically supplier marketplaces and their circumstances after the internal examination of identifying the business needs is finished. Here, suppliers and potential suppliers must be contacted in order to get the relevant information.

Organisations must make sure that the data they collect is current throughout time in order to guarantee relevance. Here, several approaches, including SCOPE analysis and Porter’s five forces analysis, will be helpful throughout this analysis.

5. Establish definite goals

It’s time to develop a clear vision for what needs to be accomplished after the company’s needs have been recognised. To identify the issues with your procurement process, use the data gathered in the earlier steps.

Once those have been established, arrange them in decreasing order of the effect each has on the revenue of your company. To determine the present state of your procurement functions, employ tools like a SWOT analysis. For instance, you must deploy procurement software that makes the process transparent if you want to reduce maverick spend.

6. Establish Procurement Rules

Create a list of procurement best practices that will reduce the current inefficiencies now that you are aware of what needs to be fixed. Modifying your procurement policy to address risks found during the SWOT analysis is a good place to start the process.

It would be ideal to avoid starting from scratch when developing an initial procurement policy for your company. Instead, you can modify preexisting procurement policy templates to meet the operational requirements of your company. For everyone involved in the process, procurement regulations should include guidelines on acceptable conduct as well as possible sanctions for infractions.

7. Describe your purchasing plan

Create a procurement strategy using the facts and information you have collected. This needs to include a list of the desired outcomes and the strategies that will be employed to get there.

The objectives must be specific, practical, and time-bound. The strategies that will be employed to accomplish the predetermined objectives are outlined in the tactical plan. Additionally, a “big idea” that will eventually push the bounds of possible can be included in a procurement plan.

8. Create a plan for digital purchasing

You must create a digital procurement plan using the data and knowledge gleaned from the preceding processes. The organisations must redesign their procurement technology, strategy, process, human resources, skill set, and auxiliary systems at this step.

The adoption of a digital procurement strategy needs to be prioritised since it enables businesses to focus more on strategic procurement and supplier relationships than on transactional and administrative work. A digital procurement strategy will assist companies in allocating the resources required to achieve significant gains and create an agile procurement process.

9. Implement, oversee, and improve the plan

The next step after developing a digital strategy is to put it into practice. Other corporate functions (sales, administration, human resources, and finance) will need to be included when the strategy is implemented. After implementing the digital procurement strategy, you must monitor the development and effectiveness of the implementation.

So, you’ll find this to be a simple and straightforward way to go digital thanks to the eSmart procurement cloud, which offers tools and a streamlined approach to procurement.

Framework for a procurement plan

The following components make up a perfect structure for a procurement strategy:

Use Automation to Its Full Potential in Procurement Strategy

The status quo will be questioned through a structured procurement strategy, which will also highlight fresh ideas that result in cost reductions and process improvements. The plan will be more successfully implemented and tracked over time if process automation tools are used. They actively reduce risks and errors while assisting in automating complicated procurement processes.

Organisations may implement their procurement strategy model using eSmart Procurement Cloud to enhance operational management of procurement, from process automation to role-based user dashboards. Automation enables businesses to participate in a dynamic process of cost optimisation through actionable insights and easy connectivity with outside data sources.

Are you looking for a means to automate your purchasing plan? To develop on the fly, have a peek at eSmart Procurement Cloud.