It is a topic that often makes me rethink my knowledge. Especially if in a conversation with fellow professionals, I stumble over a different opinion.

So, let us dive directly into the topic. Bear in mind that you can find completely opposite opinions on the topic. My suggestion is: Pick one, and stick to it.

What is Strategic Procurement

You can read more about Strategic procurement HERE. We are discussing the process of Sourcing and acquiring goods that are strategically important for our business.

How to select the products that should go under the umbrella of Strategic procurement? There are two criteria

● Using the Pareto principle, determine the 20% of goods and services responsible for 80% of the spend. Typically, this will boil down to a couple of products or services. And they are often delivered by the same group of vendors.

● Products that are not easy to procure and yet can stop your operations completely. By not easy to procure, I refer to products that are:

• Manufactured by one or only a couple of companies in the world
• Have a very long lead time due to the manufacturing process or transportation
• Of very high value, hence cannot be stored in larger quantities (rare minerals, gold, etc)

 Strategic procurement deals with planning, tendering, contracting and the complete Supply Chain of those products. Even though it has the word “Strategic” in its name, it is still quite an Operational activity. These products and services have an immense impact on the operation and profitability of the business. Since they are essential, they have a special treatment by the Business.

What is a Procurement Strategy?

A strategy is (from Greek στρατηγία stratēgia),

 “art of troop leader; office of general, command, generalship”[1])

is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty.[2]

Based on this, we can define Procurement Strategy as

“A general plan for the Procurement that aligns with the overall business goals and ensures smooth operation of the Business in the long run”

Like any strategy, the Procurement Strategy provides general guidance and long-term targets. The annual operational plans will then deal with a shorter time frame and more detailed goals for every element of the procurement process.

Are they connected?

This is the confusing part. Strategic products will have a special place in your procurement strategy. Here we have to segregate. The strategy is the plan for how to procure everything, including Strategic products. Strategic Procurement then executes the strategy, focusing on products and services that are declared as Strategic for the Business.

Procurement Strategy — Plan

Strategic procurement — Execution

You will find different approaches, both in literature as well in organisations. Unfortunately, there are still many unclear definitions in Procurement.

Sources

https://en.wikipedia.org/wiki/Strategy

https://abcofprocurement.com/strategic-sourcing-is-there-a-definition-of-it/