Procurement Strategy: What is it, Examples & Types

In this guide, the procurement experts at DeepStream explore the fundamentals of procurement strategy, as well as various strategic frameworks – offering guidance for procurement teams to develop and implement a strategy aligned with their goals through practical examples and case studies.

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What Is Digital Procurement?

Digital procurement refers to the use of technologies and tools to streamline and optimise the procurement process.

It involves the digitisation of various procurement activities, like sourcing, negotiation, contract management, ordering and invoicing.

The key aspects of digital procurement include:

Online Sourcing and Supplier Management:

·      Using digital platforms and marketplaces to source and evaluate suppliers.

·      Maintaining a centralised database of supplier information and performance data.

E-Tendering and E-Auctions:

·      Conducting bidding and negotiation processes electronically.

·      Automating the tendering and auction processes to increase efficiency and transparency.

Contract Management:

·      Digitising and centralising contract information and documentation.

·      Automating contract creation, review and renewal processes.

Automated Purchasing and Invoicing:

·      Implementing digital purchase order and invoice processing systems.

·      Integrating procurement systems with financial and Enterprise Resource Planning (ERP) systems.

Data-Driven Decision Making:

·      Leveraging procurement data and analytics to make more informed decisions.

·      Identifying cost-saving opportunities, optimising supplier relationships and improving overall procurement performance.

Collaboration and Integration:

·      Enabling seamless communication and information sharing between procurement teams, suppliers and other stakeholders.

·      Integrating procurement systems with other business applications, like inventory management and logistics.

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There are many benefits of digital procurement, compared with traditional procurement processes, including:

·      Increased efficiency and productivity in procurement processes.

·      Improved visibility and control over spending and supplier relationships.

·      Enhanced data-driven decision-making and strategic sourcing.

·      Reduced manual errors and paperwork.

·      Increased transparency and compliance in procurement activities.

·      Better collaboration and integration across the company.

Digital Procurement Strategy Definition

So, how do businesses unlock the benefits available with digital procurement?

The most successful procurement projects are supported by a combination of relevant tools and strategies.

Procurement strategies are comprehensive plans that outline a company's approach to managing its procurement processes and activities to achieve its business objectives.

A strategy defines the guiding principles, policies and procedures that govern how a company sources, selects and manages suppliers – as well a show it acquires the goods, services and resources necessary to support its operations and meet its goals.

Effective procurement strategies help companies optimise their spending, mitigate risks, foster collaborative relationships with suppliers and continuously improve the efficiency and effectiveness of their procurement function.

Types of Procurement Strategies

There are several unique types of procurement strategies that companies can adopt based on their specific needs and goals.

Below are some of the most popular types:

Cost-Focused Procurement Strategy:

·      Focuses on minimising the total cost of ownership (TCO) for goods and services.

·      Emphasises price negotiation, volume discounts and standardisation of purchases.

Quality-Focused Procurement Strategy:

·      Prioritises the quality of goods and services over cost.

·      Emphasises supplier qualification, performance monitoring and continuous improvement.

Innovation-Focused Procurement Strategy:

·      Aims to drive innovation by collaborating with suppliers and sourcing new technologies.

·      Encourages the exploration of new products, services and solutions.

Risk-Mitigating Procurement Strategy:

·      Focuses on identifying, assessing and managing procurement-related risks.

·      Emphasises supplier diversification, contract management and business continuity planning.

Sustainability-Focused Procurement Strategy:

·      Incorporates environmental, social and ethical considerations into the procurement process.

·      Prioritises the selection of suppliers with strong sustainability credentials.

Agile Procurement Strategy:

·      Emphasises flexibility, responsiveness and adaptability in the procurement process.

·      Utilises iterative, incremental and collaborative approaches to procurement.

How to Create an Effective Procurement Strategy

The first step in driving more efficient and sustainable procurement is identifying areas of underperformance – or potential areas for improvement or growth – in your current processes.

Below is a step-by-step guide to reviewing existing processes and developing a tailored procurement strategy for your business:

Understand the Business Objectives:

·      Analyse the company's long-term and short-term goals, as well as the challenges and opportunities it faces.

·      Identify the role of procurement in supporting the company's strategic priorities.

Assess the Current Procurement Landscape:

·      Evaluate the existing procurement processes, policies and systems.

·      Analyse spend data, supplier performance and the company's procurement maturity.

·      Identify areas for improvement and optimisation.

Define the Procurement Strategy Objectives:

·      Establish clear and measurable objectives for the procurement strategy, like cost savings, risk mitigation, or supplier innovation.

·      Make sure the procurement strategy aligns with the company's overall business strategy.

Develop the Procurement Strategy:

·      Determine the appropriate procurement approach, such as a cost-focused approach, a quality-focused approach, or a combination of the two.

·      Establish procurement policies, processes and procedures to support the strategy.

·      Identify the required resources, technology and capabilities to implement the strategy.

Implement the Procurement Strategy:

·      Communicate the procurement strategy to stakeholders, including internal departments and suppliers.

·      Provide training and support to implement effective adoption and implementation.

·      Establish performance metrics and KPIs to measure the success of the procurement strategy.

Monitor and Continuously Improve:

·      Regularly review and assess the performance of the procurement strategy.

·      Identify opportunities for improvement and make necessary adjustments.

·      Leverage data and analytics to drive ongoing optimisation and decision-making.

Collaborate With Stakeholders:

·      Foster cross-functional collaboration between procurement, finance, operations and other relevant departments.

·      Engage with suppliers to align on strategic goals and explore opportunities for innovation.

Examples of Procurement Strategies in Action

After conducting a review of existing procurement processes, businesses may uncover areas of focus and improvement. These will drive their future procurement strategies.

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This may look like one of the following examples:

A Cost Reduction Procurement Strategy:

·      A retail company implements a centralised procurement model to leverage economies of scale and negotiate better pricing with suppliers.

·      Key elements: Spend analysis, supplier consolidation, volume discounts and process optimisation.

A Supply Risk Mitigation Strategy:

·      A pharmaceutical manufacturer diversifies its supplier base to reduce supply chain disruption risks.

·      Key elements: Supplier qualification, dual sourcing, inventory optimisation and supply chain mapping.

An Innovation-Focused Procurement Strategy:

·      A technology firm establishes a supplier innovation program to co-develop new products and solutions with its key suppliers.

·      Key elements: Supplier scouting, joint R&D initiatives, intellectual property sharing and supplier performance incentives.

A Sustainability-Driven Procurement Strategy:

·      A consumer goods company implements a sustainable procurement program to source environmentally and socially responsible materials and services.

·      Key elements: Supplier sustainability assessments, green product specifications, life-cycle analysis and supplier collaboration on sustainability initiatives.

A Procurement Localisation Strategy:

·      A manufacturing company shifts towards a local sourcing model to reduce transportation costs, lead times and carbon footprint.

·      Key elements: Local supplier identification, supplier development, logistics optimisation and inventory management.

An Agile Procurement Strategy:

·      A software development company adopts an agile procurement approach to quickly respond to changing market demands and customer needs.

·      Key elements: Flexible contracting, iterative sourcing, rapid supplier onboarding and cross-functional collaboration.

A Digital Transformation Strategy:

·      A financial services firm invests in e-procurement technologies and automation to enhance the efficiency and visibility of its procurement operations.

·      Key elements: E-sourcing, contract management software, robotic process automation and data analytics.

Procurement Strategy Framework

Successful digital transformation rarely comes from trial and error or guesswork – it needs a focused strategy.

A procurement strategy framework is a structured approach that helps companies develop and implement effective process.

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Below is an example of a procurement strategy framework that can be used to deliver positive transformation and help procurement professionals reach their goals:

Procurement Objectives:

·      Clearly define the key objectives for the procurement function, like cost savings, risk mitigation, supplier innovation, or sustainability.

·      Make sure that the procurement objectives are aligned with the company's overall business strategy.

Procurement Spend Analysis:

·      Conduct a comprehensive analysis of the company's procurement spend, including the categories, volumes and suppliers.

·      Identify opportunities for optimisation, like consolidating spend, leveraging economies of scale, or rationalising the supplier base.

Supplier Relationship Management:

·      Develop a structured approach to managing supplier relationships, including supplier qualification, performance monitoring and collaborative initiatives.

·      Classify suppliers based on their strategic importance and the level of collaboration required.

Procurement Processes and Policies:

·      Review and optimise the company’s procurement processes, from sourcing and contract management to invoice processing and payment.

·      Establish clear procurement policies and procedures to maintain consistency, compliance and control.

Procurement Organisation and Capabilities:

·      Assess the structure, roles and responsibilities of the procurement function.

·      Identify the skills, competencies and resources required to effectively execute the procurement strategy.

Procurement Technology and Systems:

·      Evaluate procurement-related technologies and systems, like e-procurement platforms, contract management tools, or spend analytics solutions.

·      Develop a roadmap for leveraging technology to enhance the efficiency and effectiveness of the procurement function.

Performance Management:

·      Establish key performance indicators and metrics to measure the success of the procurement strategy.

·      Implement a continuous improvement process to monitor, evaluate and refine the procurement strategy over time.

eProcurement With DeepStream

DeepStream's eProcurement software is designed to transform procurement processes, helping teams save time and reduce expenses.

By automating workflows, centralising communication, and providing intuitive evaluation tools, DeepStream empowers procurement professionals to focus on strategic activities rather than manual tasks.

The platform's features – including customisable workflows, supplier scorecards, and audit trails – enable companies to maintain and develop a robust procurement strategy.

With seamless integrations and dedicated customer support,DeepStream provides a smooth transition to more efficient and effective procurement strategies.

Frequently Asked Questions (FAQs)

Q: What Are the Key Elements of eProcurement?

A: The key elements of e-procurement include electronic requisitioning, online catalogues, e-sourcing, e-tendering, e-auctions, contract management, e-invoicing and spend analytics. These elements leverage technology to streamline and automate the procurement process, improve efficiency, increase transparency and enhance data-driven decision-making.

Q: What Is the Future of Procurement?

A: The future of procurement is likely to be an increasingly digital, data-driven and collaborative environment. Procurement will leverage emerging technologies like AI, machine learning and blockchain to enhance predictive analytics, automate processes and foster deeper supplier partnerships. The function will shift towards strategic value creation, focusing on innovation, sustainability and enterprise-wide optimisation.