Why Your Business Needs a Strategic Procurement Solution

What is the key responsibility of procurement today?

Is monitoring costs the number one priority? Or is it mitigating supply risks? Or having a plan to negotiate favorable terms with suppliers and identify strategic cost-saving opportunities?

What about supplier master data management?

And what about sustainability? Considering the importance of curbing supply chain emissions and procurement’s role in evaluating and shortlisting vendors, it needs to spearhead the sustainability mission.

In most enterprises, procurement is now expected to do a lot more and, perhaps more importantly, with less resources. Its scope of work and responsibilities have expanded. This means procurement needs to work in a more strategic manner.

It also means that the team must do away with manual, time-consuming processes and leverage technology to automate these tasks. This will allow the team to focus on value-adding tasks and contribute in more strategic ways.

What is Strategic Procurement?

Strategic procurement involves looking beyond immediate and short-term functional goals to align procurement with longer-term business goals. It considers multiple business objectives including cost management, risk mitigation, quality assurance, innovation, sustainability and user experience.

For example, procuring goods at the lowest prices may be the immediate priority, but this must be merged with other priorities such as checking product quality, sustainability and supplier performance.

Likewise, in the process of supplier selection, procurement needs to look beyond pricing and assess suppliers’ track record and supply-related risks. Additionally, the team simply cannot pick suppliers randomly with gut feeling. Instead, it must follow a structured, data-driven approach for this process.

A data-driven, enterprise-wide process, strategic procurement aims to minimize supply risks and focuses on long-term development by using a combination of technology and tools. The objective is to adopt a long-term approach and optimize procurement processes with ongoing market research and supplier relationship management.

Unlike day-to-day tasks, strategic procurement involves greater cross-functional collaboration. It requires procurement professionals to work closely with other functions and understand their needs to implement a strategy that can meet larger business goals.

Here are a few goals of strategic procurement:

1. Cost monitoring:

Although this must be looked at in a more holistic manner, containing costs, wherever feasible, is a key priority for procurement, especially amid an uncertain macroeconomic landscape.

2. Risk management:

It is equally vital for procurement to undertake comprehensive risk management and take steps to address potential risks. As part of this strategy, procurement teams in many enterprises are looking to diversify their supply base and gain end-to-end visibility.

3. Supplier relationship management:

In many ways, effective supplier management can differentiate a business that can thrive in today’s uncertain climate from another that struggles to get adequate supplies. Effective supplier management includes conducting periodic reviews and evaluating supplier performance against set goals.

4. Sustainability:

Extensive dealing with vendors and supply chain partners has highlighted the need for procurement to lead the sustainability initiative. Looking at suppliers’ track record and sustainability performance can help the team select the right supplier. Additionally, procurement should work closely with suppliers and internal functions to foster a culture of learning and innovation.

5. Competitive advantage:

Businesses that engage in strategic procurement are in a better position to respond to changing market conditions. They can adapt quickly to meet customer demand and gain a competitive edge in this process.

6. Continuous improvement:

Strategic procurement fosters a culture of continuous improvement by monitoring performance, analyzing procurement data and identifying areas of improvement.

Also Read: How to Choose the Right Procurement Solution for Your Business

Leveraging Tech-Powered Strategic Procurement Solutions

The use of advanced technology helps procurement gain a comprehensive view of market insights and strategic guidance. This intelligence enables the team to tap into preloaded critical market insights across different categories.

Additionally, by accessing a vast network of active suppliers, the team can make an informed choice based on category, region and specific requirements. It can also identify new innovative suppliers and unlock the possibility of supplier-driven innovation.

Featuring advanced analytics tools, procurement technology can quickly analyze vast data sets and derive actionable insights, which can then be used to optimize processes and identify potential savings opportunities.

Powered by artificial intelligence, next-gen procurement software can streamline the end-to-end procurement process, from sourcing and spend analysis to purchase order processing, contract management and invoice processing. It can align procurement with business goals and enhance the team’s strategic reach and impact on the business.

Learn how GEP’s AI-powered, cloud-native, source-to-pay procurement software can enhance your team’s performance and unlock strategic opportunities.