What is the meaning of strategic procurement?
Strategic Procurement means Long-range plans for ensuring timely supply of goods and/or services that are critical to a firms ability to meet it's core business objectives.There are probably three key terms to consider to answer this question.The first is “purchasing” or “transactional procurement”. This is basically exchanging money for goods/services and then receiving them. Good procurement professionals try to move their organisations away from this type of buying practices.The second is simply “procurement”. Procurement goes beyond just a transaction. It looks at everything that happens before, during and after the transaction. This means things like needs analysis, market research, sourcing strategy, total cost of ownership evaluation, value for money assessments, contract negotiation, sustainability options and supplier relationship management.“Strategic procurement” is not far removed from “procurement”. In fact, ideally they are one and the same in a lot of ways. But perhaps the best distinction is that strategic procurement is best defined in terms of aligning the strategic direction of an organsiation with managing its supplier relationships to develop the capacity and capability to be sustainable, affordable and effective. That is achieved through sound procurement practices and decreasing or removing transactional procurement activities.
Why is strategic procurement important?
It ensures that the company acquires goods and services on a cost-effective basis while improving value creation. It provides continuous improvements over these factors and empowers the organization to take advantage of purchasing power. ... 2 Strategic sourcing between of purchasing and procurement.Strategic sourcing is an institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company. Procurement operations support tactical day-to-day transactions such as issuing Purchase Orders to suppliers, whereas strategic sourcing represents to strategic planning, supplier development, contract negotiation, supply chain infrastructure, and outsourcing models.In many ways Strategic Sourcing can be compared to how people shop for everyday items. A gallon of milk sold at a convenience store costs more than the same gallon sold at the supermarket. The reasoning is simple; the convenience store is likely open 24 hours a day, making it easier to buy milk than the supermarket.Most people only buy items like milk at a convenience store when it is late, they are in a hurry, or they are far away from a grocery store. The stores take advantage of that immediate need to charge a higher price.Strategic sourcing software provides organizations with a number of benefits, especially if they employ a procurement software system to help manage the operations. Let’s look at some of the more important benefits strategic sourcing can provide
What should a procurement strategy include?
Procurement, by definition, is the acquisition of the materials, supplies, services, etc. that a company or project requires in order to successfully operate. ... These details will include the business' or project's objectives, the available and existing resources and supplies, the budget and the timeline.Companies implement Purchasing strategies in order to make cost effective purchasing decisions from a group of efficient vendors who will deliver quality goods on time and at mutually agreeable terms.These purchasing strategies may include such choices as making procurement savings by using centralized purchasing which is concentrating the entire procurement activities within one principal location.Other companies may decide to undertake a single source procurement strategy that involves obtaining excellent dedicated service from a single vendor. These strategies are predominant when sourcing for IT or indirect purchasing such as office supplies and cleaning.Without a documented procurement strategy, it is nearly impossible to keep cash flowing smooth and even. Every organization’s procurement strategy should be uniquely tailored to meet the needs of the business. The strategy you create should consider the company’s current status and protocols, stakeholder buy-in of procurement strategy, market conditions, and company goals, initiatives, and objectives.
