Procurement Strategy Framework

(Big-Picture Approach: Strategic Decisions That

Align with larger Objectives)

Krishan K. Batra
President & CEO
ISM-INDIA

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Introducing the Presenter...
Krishan K. Batra has diverse experience of 4 decades in the field of Technology &
SCM. He enjoys engaging people in sustainable transformation and inspiring
business excellence. In his last assignment with UN organization as Chairperson of
the supply chain, he was instrumental in re-engineering business processes and
implementing ERP worldwide.

He started his career with TATA Group after completing M.Tech from IIT Delhi. Later
he completed MBA from Syracuse University in USA. Krishan has worked in
Switzerland, Denmark and USA in different capacity. He is the founder of UNSPSC
which is global standard for coding goods and services. He has worked with many
organizations to optimize supply chain and build their professional capacity.

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Key Takeaways
❖ Journey of Procurement & Current Procurement Landscape
❖ What is Procurement Strategy Framework?
❖ Need for Big Picture Approach
❖ Creating & Developing Procurement Strategy
❖ World Class Procurement Framework
❖ Technological Advancement
❖ Challenges & Future Trends
Objective: Cost Optimization & Add Value

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 Journey of Procurement (Over 100 Years)
❖ It has evolved significantly over the last century due to advances in technology
& globalization and disruptions.
❖ General overview of the journey of procurement.
❖ Early 20th Century (1920s-1940s): Manual Process
❖ Mid 20th Century (1950s-1960s): Standardized Processes
❖ Late 20th Century (1970s-1990s): ERP to integrate functions
❖ Turn of the Millennium (2000s): E-Procurement
❖ Recent Years (2010s-2020s): Cloud Based Software, AI

Shift from a transactional and administrative role to a strategic and value-adding one

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Stages in Procurement Process

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Current Procurement Landscape

❖ With increased disruptions, Procurement is starting to get

recognition as a major contributor to company growth.
❖ Chief Procurement Officers (CPOs) are becoming increasingly
important members of the boardroom.
❖ On an average 40-70% of total spend is through procurement.
❖ It is a key pillar of Supply Chain Management.
❖ It is responsible for both optimizing costs and reporting on
savings achieved, and delivering more tangible benefits.

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What's a procurement strategy?
A procurement strategy focuses on all the steps involved in the procurement
process to monitor a business's operational performance closely. Once
established, this strategy allows organizations to identify areas for process
optimization and cost reduction.

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What is Procurement Strategy Framework?
❖ Procurement strategy can be best defined as a long-term plan to
acquire the necessary resources and supplies.
❖ The making of a procurement strategy depends on several
factors, including purchase timeline, budget, the risk associated,
cost of ownership, and so on.
❖ Aim of strategies mainly focuses on cost-effectiveness and
expanding the organization organically.
❖ Framework of procurement strategy includes statements, results,
time frame, tactical plans, & measures to govern procurement.

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Framework of Procurement Strategy
1.Strategy Statement - What's the purpose and objectives
2.Desired Results - What you aim to deliver
3.Timeframe - How much time it will take to finish the
deadline
4.Tactical plan - How you will be approaching and
implementing the strategy
5.Measures - The tools and software that you will use to
measure the performances

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What’s your vision for procurement?
An effective procurement strategy should answer these questions:
•What are you trying to achieve?
•What is your procurement vision and mission?
•How will it be implemented?
•What are the best companies doing?
•What tools and resources will be needed to get there?
•How will success be measured?
•How does all this fit with the broader business strategy?

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Procurement Strategy Elements

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Why Develop Procurement Strategy?

1.Procurement Strategy is a pillar of effective , innovation & CSR

2.Reflects the mission, vision, and aim of the organization in the
market
3.Provides a framework to the team by a set of methods and
practices aligning with the purpose.
4.Helps to ensure cost reduction and add value.
5.Open the doors for new opportunities and improvement.
6.The strategy is known for minimizing the delays and speeding up
the supplier chain process.
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Why do you need a procurement strategy?
Commonly, procurement strategies will revolve around several objectives,
including, for example:
•Better spend visibility and control,
•Cost efficiency through strategic sourcing.
•Better contract delivery and coverage,
•Improved key supplier relationships.
•Quality management and product development,
•Improved customer experience and value,
•Process and policy compliance,
•Fewer errors and lost opportunities on purchase transactions,
•Sustainable development goals, such as reduced carbon footprint,
•Increased supplier diversity, AND Many More!
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 Need for Big-picture Approach
❖ World keeps turning and conditions in which businesses operate &
procurement functions support are change..
❖ Global economy forecast to grow by 2.7% in 2023 and 1.1% in
advanced economies (weakest growth since 2001).
❖ Post-Covid world of high inflation – and rising interest rates as an
antidote.
❖ This means procurement organizations must reassess and redesign
their tactics to manage fluctuating costs and increased supplier risk.
❖ Procurement strategy must be rewritten.

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Components of a Big Picture Procurement Strategy

•Clear objectives and goals. A successful procurement strategy

establishes clear objectives and goals that are aligned with the
organisation's broader objectives. ...
•Strategic planning: ...
•Technology adoption. ...
•Comprehensive supplier management. ...
•Robust risk management:

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Creating Procurement Strategy

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Developing Procurement Strategy

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Procurement Strategy: Key Steps

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Steps to Build Your Procurement Strategy
1.Evaluate your business at present
2.Analyze and assess market conditions
3.Set and define company goals
4.Define Procurement Policies
5.Discuss with the stakeholders
6.Invest in the software and tools
7.Outline and develop strategies
8.Execute and implement right

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Elements of Public Procurement

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 Elements of Public Procurement
❖ Demand management involves the compilation and publication of costed
procurement plans that are in line with the strategic plan of a procuring entity
❖ Category and sourcing management involves the preparation, publication,
evaluation, and adjudication of tender documents by category teams
❖ Contract management involves the awarding, creation, negotiation, and
administration of contracts between state entities and suppliers
❖ Supplier relationship management involves the monitoring of supplier
performance following the award of a contract
❖ Compliance and risk management involves the provision of assurance that
appropriate checks and balances are in place to ensure good governance
practices

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Aligning Procurement with Organizational Goals
The strategy must align with the overall strategic intent of
the business. Fact-based spend analysis will help you align
and prioritize your strategy to corporate goals across all
functions. Inputs to the strategy should include:
•Corporate Vision and Mission
•Corporate Medium-term Plans
•Annual Budgets and Projected Revenue
•Economic Forecast
•Commodity Indices
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Implementing the Framework
❖ Strategy is a living document. External and internal circumstances
change, and so must your plans.
❖ Don't be too fixated on your precious document, but instead
consider it as a starting point.
❖ You will be wiser after you start executing your plans.
❖ Stakeholder feedback should be used to fine-tune the strategy.
❖ Utilize data and insights to improve your strategy and the
effectiveness of your actions.
❖ New opportunities may emerge that have a higher likelihood of
success than the existing ones in your plan.
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 Measuring & Evaluating Success
❖ Tracking supplier and procurement performance open
opportunities for continuous improvements and innovation.
❖ Measuring, monitoring, and reporting on supplier and
category performance with pre-determined Key Performance
Indicators (KPIs) creates a performance-driven environment
in which people are engaged and accountable.
❖ Measures should be aligned with business KPIs to ensure
you're going in the same direction and delivering business
impact.
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World Class Procurement Framework
It consists of Strategic, Executional & Operational
processes supported by appropriate infrastructure.

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Best Practices (Case Studies)
❖ Organizations that adopt a silo approach and view the
procurement process merely as a method of obtaining
goods and services to fulfil an internal need, have missed
a trick. An effective procurement strategy can create
considerable business value through process optimisation
across each department, and achieve better cost
reductions.

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Tips to Build World Class Procurement Strategy
1 Build trusted supplier relationships:
Working with the right partners not only generates a degree of
goodwill, but will also land the operational and cost
efficiencies that can take your organization to the next level.
2. Professionalize the procurement function
Align, incentivize and appropriately staff the supply chain, purchasing, facilities
and logistics teams. Don’t treat the procurement team as ‘buyers’ of goods and
services for the organization. Hire managers who can manage supplier and
stakeholder relationships well, have strong communication skills, and are
strategic thinkers.

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Tips to Build World Class Procurement Strategy

3. Don’t sweat the small stuff

Look at how you can streamline the purchasing of low-value
‘non-critical’ items. It makes no sense to spend $100 in
process costs to purchase an item that costs only $100.
Rather than having expensive procurement professionals
buying low-value items, look at implementing a programme
that allows the users of non-critical items to take ownership
and reduce processing cost.

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Tips to Build World Class Procurement Strategy
4. See technology as an enabler, not a threat
As much as you need to hire the best employees, you also need to be
equipped with the best systems and software to garner long-term cost
efficiencies and guarantee a real return on investment from
procurement.
5. Collaborate for strategic benefit
At a base level, procurement means sourcing what the organisation
requires, at the right price, for the appropriate stakeholder. Strategic
sourcing won’t achieve this objective on its own but through the
creation of a collaborative COE.
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Tips to Build World Class Procurement Strategy

6 Emphasize the benefits of risk and control

Prioritize the implementation of structures and controls. This
shouldn’t come at the expense of the streamlining of
processes – in fact, it should be seen as the forerunner. Only
once adequate processes are in place to manage workflow,
can the benefits of a streamlined approach bear fruit.

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Qualities of Good Procurement Strategy

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Technological Advancement

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 Technology Advancement
❖ Procurement function is often stuck in analogue
processes and outdated technologies.
❖ It is a far cry from digital procurement.
❖ Data is kept in numerous Excel spreadsheets or Word
documents and seeps away in isolated data silos. This makes
this data incapable of being used
for automation or prediction.
❖ Plus, the experts who understand it are also lacking.

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KEY CHALLENGES

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 Review & Continuous Improvement
❖ It is important to regularly review policies, procedures and
controls coupled with integrated risk management practices.
❖ Create a strong best-practices manual that can stand the
organization in good stead.
❖ Process improvements, such as the implementation of a
technology programme with an spend management solution, can
result in increased visibility and data availability.
❖ This can be used by procurement professionals to make more
informed purchasing and operational decisions.

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Key Players of Strategic Procurement

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Key Procurement Trends

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Trends: Emphasis on Supply Base

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 Final Thoughts
❖ Main goal of a procurement strategy is to deliver business
value and competitive advantage for the organization.
❖ Commonly this is achieved with cost optimization, increased
efficiency, and improved performance.
❖ Spend analytics provides the key to developing a clear
procurement strategy.
❖ Identifying savings opportunities, managing risks, and
optimizing an organization's buying power are accelerated
with the application of the right technology to spend.

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Let’s move on . . .

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 THANK YOU!
For More Information Contact Me:

Krishan.batra@ism-india.org
+91 9971171220

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