Strategic Thinking for Procurement Professionals
We’re all working hard to shift the dial meaningfully when it comes to moving Procurement from a tactical to strategic profession. The good news is that there is a lot of great information and tips out there – which is probably why this article was so popular this year. Set some time aside with a mince pie and revisit it now.
How often have you heard the word ‘strategic’ used in meetings in the workplace? I was embarrassed to count the use of the word no less than 15 times in the space of a 30-minute stand-up meeting. It prompted an interesting conversation: What is the real meaning of strategic thinking, and how does it apply to Procurement?
What Is Strategic Thinking All About?
I support the rallying cries to ban this term, however, only in situations where it is used as an unnecessary filler. A strategic brain should be valued; it brings necessary pragmatic and creative solutions to the table, so let’s not throw the baby out with the bath water just yet.
A Forbes article explains that “… true strategic thinking is the ability to imagine future conditions, consider multiple ways of succeeding, assess them and create plans to take action…a big part of strategic thinking is also agility—planning for a set of conditions and then having the ability to shift quickly when things change.”
How Does It Apply to Procurement?
In Procurement itself, Strategic Procurement is about jumping in your helicopter to hover over the topic, category or issue at hand. It’s about thinking bigger and broader, holding the long term picture firmly in view and being open to different ways of tackling issues and creating new opportunities. The idea should encompass the whole supply chain, helping to manage risk by creating better supplier relationships and greater alignment with organisational goals.
What it’s not about is dishing out the same old traditional procurement methods and processes – this is classic tactical, transactional short-term behaviour.
There are plenty of good examples in industry, with some of the big name players doing exactly as we have described here to create a competitive edge for the organisation:
- In the technology sector, consider Apple’s strategic procurement of crucial components ahead of its competitors. By securing large quantities of flash memory from critical suppliers for its iPads and iPhones, Apple not only ensured its own supply but also created a shortage for its competitors.
- Starbucks upholds its sustainable brand image and assures quality by forging strategic, direct relationships with coffee farmers around the globe. This strategy ensures control over quality and continuity of supply, and insulates Starbucks from fluctuations in global coffee prices. By doing this, Starbucks can deliver consistent products and build customer brand loyalty.
You may think this sounds great, but you’re not Howard Schultz or Steve Jobs, looking to revolutionise an entire industry and fundamentally shape modern society. So, where do you start?
How to Get Started
The answer lies in having a blueprint to guide your purchasing processes and grow your strategic muscle.
- Start by ensuring you have an in-depth understanding of your organisation’s landscape, goals and objectives.
- Look at what procurement activities align and support these goals.
- Dissect your organisation’s spend categories – what are you buying, from whom, and why? Understanding this will allow you to identify suppliers who deliver the best value in terms of quality, service, cost, and innovation.
- How are you buying? Instead of focusing solely on purchasing, think about the whole lifecycle of the procurement process. If it’s products and goods, consider how acquisition, usage, and disposal impact your organisation. For services, think about markets, supplier relationships, and innovation.
- Look at your supply relationships. A procurement strategy written in isolation from other stakeholders and the supply chain is too one-sided. Collaborating with a variety of stakeholders, both internal and external, produces a higher-quality product. Often, the people who know your market the best are the suppliers in it.
- Analyse supplier performance and risk. It’s time to dig out the contracts and check the Key Performance Indicators, supplier performance, and risk assessments. What does this information paint a picture of? A healthy contract? A low-risk environment/investment?
- Finally, investing in yourself is paramount. Find mentorship programs, seek industry certifications, engage with professional networks, and leverage digital tools to augment your procurement skills. Practice makes perfect!
What Are Some Exercises to Develop Strategic Thinking Skills for Procurement?
To begin the journey towards becoming a strategic thinker in procurement, it’s essential to familiarise yourself with various exercises.
The first is nurturing analytical abilities. You can start by critically evaluating case studies and existing procurement strategies to identify their strengths and weaknesses. Remember to ask yourself; is there a better approach? What would be the probable outcome of implementing different tactics?
Another exercise to develop strategic thinking is the practice of spend analysis. This involves reviewing spend data, understanding patterns, and utilising the information to drive procurement decisions. Would a shift in suppliers lead to cost savings? Can consolidation of purchases result in volume discounts?
Strategic Thinking Is Here to Stay
The mindset and exercises that underpin strategic thinking still have relevance; make sure you don’t glaze over too much when this comes up in your next meeting. Remember, it’s about adopting a future-oriented outlook to make better, more informed decisions and following these through with actions.
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