Wondering How to Define a Procurement Strategy? Let’s Start From the Basics!

Change is the only constant — Whosoever said that was surely aware of what would remain the undisputed truth of the world and interestingly history is full with the umpteenth instances justifying this.

For instance, take Eastman Kodak Company (simply Kodak), the company which enjoyed a dominant position in 20th century in photographic film and made all of us to have our ‘Kodak Moment’.

From inventing the first digital camera in 1975 to declaring bankruptcy in 2012, the Kodak story is a sheer example of how one can lose the sheer dominance if not adhering to the continuous change — sticking to digital technology and cameras in this case.

Procurement Strategy as a function has evolved in a similar fashion — from being seen as a support, passive and ad hoc function to a strategic, active and vital one which can bring a greater share of value to any organization along with the cost savings and operational efficiencies.

When an organizations looks at digital transformation through innovations, integration, and collaboration to stay relevant in the market, the procurement strategy becomes an integral part of the overall decision making.

This blog will try to shed some light upon how a proper procurement strategy in place can derive greater benefits for any organization.

1. Streamlined Spend — A clear visibility into an organization’s spending behavior through historic data will enable the company to have a clear understanding where the money is being spent and empower them to negotiate contracts with vendors and avail discounts wherever applicable. Employing a well-defined spend analysis solution can help in having the right visibility.
2. Value beyond Cost Savings — From the business perspective, cost savings remains the underlying benefit of an effective procurement strategy. Procuring all the items at the best possible rate provides upfront saving to an organization. When the strategy is adopted widely by the whole organization, it often leads to efficient purchasing process and better matching good and services as per the needs. Thus in turn helps the procurement department to generate value for other functions at the organization
3. Centralized Operations — Having centralized all the procurement related operations right from sourcing to payments at one place help organizations to maintain consistency and removes redundancies from the complete process. This often leads to time saving and lead to efficient decision making.
4. Strong Supplier Partnership — With efficient processes in place, vendors and suppliers can have the real time visibility in the procurement cycle. They will be able to navigate through the standard procedures, to track the status of payments and to raise their concerns at any given point of them. This helps in establishing the transparency between a supplier and organization and leads to a stronger partnership.
5. Risk Management — An up-to-date procurement process will help an organization to foresee any challenges or roadblocks in the complete supply chain like (material surplus/shortage, financial issues, delays etc). Also, it establishes standardized levels and hierarchies of approvals that ensure only authorized transactions are made at each and every step. This helps in ensuring the purchase from the authentic suppliers at the right price at the right time.

Along with these benefits, having a procurement strategy helps an organization to streamline their source to pay cycle and to gain the coveted edge in the market place.

The right software solutions leads to value creation for the overall unit and ensures cost and time savings along with a happy buyer and supplier. Happy Procuring!!

Learn How Zycus can partner in your Procurement Transformation journey.