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Do I need a procurement strategy for next year? Try this 5-step assessment


We are all familiar with the Q4 “crunch time” for Procurement; contracts are up for renewal, suppliers want to cut a deal and stakeholders are trying to exhaust their remaining budgets. While it’s easy to get caught up in the day-to-day, is it not prudent to wait until next year to develop a new procurement strategy. A recent LinkedIn poll, conducted by ProcureAbility, highlighted that many businesses have in fact turned their focus to next year’s goals with achieving savings targets trailing as the second focus.

Check out the poll’s results here:

(Click image to enlarge)

It is easy to say, “focus on next year’s strategy.” But where do you begin?

Many procurement organizations see annual planning as a time to set savings goals and identify sourcing opportunities that will allow them to meet these goals. This is an understandable approach since it paves the way to understanding the coming year’s workload, which can in turn inform budgets, resource needs and org structure.

However, rushing off to plan your savings pipeline without considering your company’s business goals can quickly get you out of sync with your stakeholders. Instead of jumping to the savings plan, it’s helpful to take a step back and assess what the business wants you to deliver and how you can meet those expectations. With this knowledge, you can set an intentional plan and strategic roadmap for the coming year.

This high-level assessment doesn’t have to be complicated. In fact, it can be done in five simple steps, as shown below:

Corporate Goal Procurement’s role to achieve Requirements for success Current fulfillment capability Gaps/Obstacles
Sample: Streamline financial reporting by implementing new financial analytics system Sample: Research potential suppliers; conduct sourcing events to negotiate best arrangement Sample: IT software and services expertise; market intel/price benchmarks; IT negotiation skills; available resources Sample: Leverage learnings from last large software purchases; engage IT team for subject matter expertise Sample: External market intelligence; IT negotiation skills; extra capacity to run RFPs

Step 1: Define the corporate goal (you can also do this at the functional or stakeholder level). This can come from your company leadership, stakeholder presentations or even your company website. Try to think as long-term as possible and engage your stakeholders as needed to understand their goals. The key is to start with business goals, not procurement-specific goals.

Betsy Pancik, VP at ProcureAbility

Step 2: Identify Procurement’s role in achieving that goal. What are you expected to deliver to meet the goal? How will you help the company (and your stakeholders) be successful? What is your value in the process?

Step 3: List out what you need to be successful in delivering on the expectations you defined in Step 2. For example, if your role is to negotiate complex IT agreements, you need resources who have that experience and have the time to devote to the project.

Step 4: Identify the items you identified in Step 3 that you can fulfill today. Be honest. For example, do you have the right market intelligence? Do you have sufficient category expertise on the team?

Step 5: Compare the results from Steps 3 and 4 to identify gaps/obstacles and potential solutions to close them.

Once you have completed these steps, you will clearly see where you need to focus and how you can get on the path to success. These elements can formulate your strategy for the next 12 months and beyond.

The most common challenge facing procurement organizations that don’t think through their strategy this way is an overwhelming load of reactive, tactical work — if your stakeholders don’t see that you have a clear plan to help them, they will wait to engage you until the last possible moment. Thinking higher-level and longer-term requires procurement to consider how it supports the company as a whole.

Procurement has a big job ahead in 2021.

After a year like 2020, we must appreciate the importance of a strategic plan to drive the organization to achieve its full potential.

Betsy Pancik is ProcureAbility’s Vice President of Customer Success.