Strategic procurement, or procurement strategic planning, is a data-driven process that helps businesses align procurement and business goals. The result is greater supply chain predictability, more accurate decision-making, and better business agility.
What is strategic procurement?
Strategic procurement, or procurement strategic planning, is a process that aligns procurement strategy with business goals so as to yield business benefits through procurement. Strategic procurement leverages data to reduce risks across the entire procure-to-pay process and identify opportunities for long-term and continuous forecasting and optimizations. This also leads to more advantageous strategic sourcing.
Following global disruptions that halted supply chains and shifted business models from reactive to proactive, strategic procurement’s emphasis on data and analytics is essential for navigating business challenges, increasing transparency, making more agile and accurate business decisions, and maximizing operational efficiency by lowering costs related to mismanaged or disconnected processes.
For strategic procurement to be achieved, procurement teams will typically harness various techniques, tools, and technologies in order to collect and analyze their procurement data.
Whether the purpose is savings or forecasting, strategic procurement involves three key business principles at its core for better decision-making and procurement maturity: predictability, agility, and precision.
Differences between strategic and operational procurement
The key difference between strategic procurement and operational procurement is the end goal for each. Strategic procurement prioritizes planning and strategizing for long-term benefits across the entire procurement process and alignment with business goals, while operational procurement focuses on purchasing and sourcing services strictly for maintaining day-to-day operations.
Whereas more planning may go into the decisions made under a strategic procurement model, meeting immediate needs quickly is more likely for operational procurement.
However, the successful execution of a strategic procurement process can streamline and even simplify decisions for operational purchases required for businesses. With the analysis of supplier performance data, purchase managers can make decisions that benefit the company faster and more accurately. It also benefits end-to-end procurement management since visibility and transparency are emphasized.
Why is strategic procurement important?
The four main reasons why strategic procurement is important are ROI, expenditure, risk, and resilience. An analysis of buyer-supplier workflows and interactions at every stage of the procurement framework and lifecycle must be continuously performed to efficiently and continuously meet and predict demands and opportunities.
To better understand procurement’s influence, let’s dive into the benefits of strategic procurement to understand why it’s important.
Maximize ROI
A defining result of strategic procurement is maximizing investments and attaining the best return on investments (ROI) — both internally and externally. Via strategic objectives like implementing process automation software to reduce the pressure of manual “low-level” purchasing tasks for employees, streamlining procurement workflows, and prioritizing supplier management and performance, it’s possible to build and maintain long-term savings streams.
With a strategic procurement approach, the supplier’s or vendor’s entire lifecycle impact is considered rather than just the face-value costs. It’s through this process that procurement can accurately weigh which purchases will produce the most long-term value.
Reduce total expenditure
In order to effectively reduce direct and indirect spending and create a profitable strategy, procurement teams may consolidate suppliers or vendors, improve cost categorization to better track costs and cut back on maverick spend, or work on closing process gaps that lead to cost-draining issues like approval delays, poor work handoffs, and siloed communication.
Another way to reduce total expenditure is by leveraging tools or technology that streamlines existing systems, brings structure and standardization to procedures, and eliminates unnecessary complexity created by growing tech stacks.
In a recent Pipefy survey of business leaders influencing, authorizing, or overseeing supply chain or procurement initiatives, 50% reported having a tech stack with 51-100 different apps, systems, or other components. For 17%, their tech stack involved 101-500 components, and another 17% reported 501-1,000 components.
Minimize supply chain risks
Supply chain management is a necessary component of procurement strategic planning – and managing any disruptions or risks is a part of that.
Through a data-driven approach, strategic procurement focuses on predicting possible risks and being proactive about taking action. By leveraging a tool that provides data dashboards and AI capabilities, gathering and analyzing the necessary information for minimizing risks is made easier, as is ensuring compliance and alignment with larger business strategies and goals.
Another way to minimize risks is by creating a diverse portfolio of suppliers in order to reap the most benefit. For example, if the company is prioritizing ESG, the procurement team may source from suppliers or vendors that are compliant with certain business requirements or compliance standards.
The outcome is a more secure, compliant, and resilient business that can withstand disruption and keep up with changing market or business demands.
How to improve your procurement strategic planning
The steps involved in building a strategic procurement process include:
- Spend data analysis.
- Business needs identification to better align sourcing strategies.
- Supplier performance assessment to improve selection.
- Leveraging data for better decision-making and negotiating.
Here are some tips for getting started.
Analyze organizational spend
Data is at the core of strategic procurement, so begin by gathering, categorizing, and analyzing organizational spend. This will illuminate any trends, gaps, or opportunities, in addition to providing a full picture of company spending patterns by team, department, or business area.
Don’t forget to create a record of the raw and visualized data as well to share or refer back to later on in the process.
Identify business needs
A key element of strategic procurement is identifying and anticipating business needs. Work with various department leaders to better understand needs and upcoming costs. With this visibility, procurement can spend more time identifying the best sourcing channel and surveying the available supplier market.
Structure a procurement policy
Only 46% of procurement decision-makers are in complete agreement that employees outside of procurement follow their policies and procedures. By structuring a procurement policy and outlining expectations, regulations, and purchase guidelines, maverick spend is minimized and purchase requests are aligned with policies and procedures.
Align procurement strategy with business goals
To be a true strategic partner, procurement teams need to understand what’s driving the business and what goals they can help the larger business achieve. To do this, the following steps must be taken:
- Define KPIs and how procurement will track and report savings.
- Determine the degree to which key stakeholders (such as finance, IT, or HR) and relevant collaborators should be involved in the strategy development. By including these stakeholders, procurement can develop a strategy that benefits the entire organization — from purchasing to talent development and technology investments.
- Measure data quality to ensure that reporting is accurate and reliable.
- If data isn’t reliable or accurate, work with IT and data teams to identify and resolve system or reporting gaps.
Invest in the right technology
Technology is essential for procurement strategic planning. According to the 2024 Procurement Data Report by Amazon Business, 98% of respondents reported having plans for investments in analytics and insights tools, automation, and AI for their procurement operations in the next few years.
Pipefy’s workflow survey found that the main drivers for adopting technology like process automation software or leveraging AI capabilities range from increasing efficiency, cost savings, better use of employee time, better decision making, and faster access to information and analytics.
The main goal behind all of these drivers and benefits is improving competitiveness and business resilience. By choosing the right tools, procurement can tap into insights that can generate greater business value.
Learn more about business process automation, the impact of AI on process automation, and what to look for in procure-to-pay automation software for a more streamlined and strategic purchasing process.
Execute and refine as needed
Once a strategy is developed, it should be communicated with the company since all employees will be affected. As business goals or needs change, the procurement strategy should evolve as well in order to keep up with any necessary changes.
Become a more reliable strategic partner with Pipefy
When it comes to business strategy, it must be informed by all moving parts and this includes procurement. By tapping into key business spend data, procurement can become the strategic business partner needed to weather disruption and innovate business spending. And with the right strategic procurement solutions, teams can keep up with changes as they arise and lead the charge in procurement process optimizations.
Pipefy combines process management and automation capabilities with a no-code user interface and generative AI to give procurement (and other) teams everything they need to become the strategic partners businesses rely on to execute their strategy and meet their goals.
Here are five reasons why teams choose Pipefy for their procurement strategic planning:
- Control and visibility over procurement processes.
- Lower cost of development, implementation, and maintenance due to no-code visual interface.
- Minimize third-party risks by eliminating the need for third-party specialized services firm
- Simplified workflow and data governance.
- Consolidate and streamline robust tech stacks via custom integrations for seamless data flow and reporting.
Keep track of supplier performance with built-in process dashboards, minimize costs related to mismanaged procurement processes, and increase the productivity of employees by decreasing manual and inefficient work.
