Strategic Procurement
Strategic Procurement is an umbrella term that covers a range of activities aimed at optimizing a company’s spending on external services and products, as well as its relationships with suppliers. Strategic procurement involves the setup of a strong and resilient supply chain program that maximizes value for money, driving cost savings and advanced supplier performance. It can include multiple processes, such as strategic sourcing, supplier relationship management, contract management, and supplier diversity and development.
Strategic sourcing is a data-driven and rigorous process of strategically selecting the best suppliers and partners based on their ability to meet the needs of the company while providing cost savings and superior performance. A key part of the process involves understanding a company’s internal requirements as well as the suppliers’ capabilities and market position. Through this analysis and data-driven decisions, companies can select the most appropriate provider or partnership that best suits their needs.
Supplier relationship management (SRM) takes a broader approach by developing an overall partnership between the company and its suppliers through a range of activities. SRM builds long-term relationships with suppliers, leading to improved performance and total cost savings, but also ensures that both the company and supplier’s interests are closely aligned. It involves the negotiation of terms and conditions tailored towards the supplier, such as payment terms, delivery schedules, ordering procedures, service levels and’ reward systems.
Contract management is also integral part of strategic procurement processes, as it involves the management of the contracts between companies and their suppliers. This involves monitoring financial performance, as well as regularly assessing the effectiveness of contracts. It also requires collaboration with the suppliers to ensure the repairs and maintenance, as well as close monitoring of contract performance in order to identify and address any compliance issues in a timely manner.
Supplier diversity and development is another area of strategic procurement which aims to diversify supplier relationships by both increasing the range of services and suppliers being used. This is to ensure that the cost base of the company is spread, and that it benefits from the improved quality, delivery, and innovation from its stakeholders. The development of new suppliers should ensure that the standards of service meets the company’s needs, so regular checks and performance reviews are essential.
Strategic procurement has a wide range of benefits to companies. It allows for cost savings through negotiated contracts and favorable payment terms, leads to stronger supplier relationships, provides access to new and responsive suppliers, and improved performance from the supplier pool. Through strategic procurement, companies can ensure that they’re in control of their spend and achieve optimal value from their suppliers.
