Strategic procurement in industrial medium-sized companies: 5 tips for your department
published on
30.11.2023
Strategic procurement is not always separated from operational procurement in medium-sized companies. Especially in the manufacturing industry, the procurement department is often responsible for both areas or strategic procurement is even completely neglected. High staff shortages and operational processes usually take up so much time that too often there is no time left for the strategic side of the business. However, strategic procurement in particular is essential when it comes to placing the procurement organization on a stable foundation for the long term and developing it further.
So what needs to be done to better implement strategic procurement topics within the department? Below we have compiled five tips for your department.
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Supplier relationship and development moves into focus
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Managing categories as strategic business units
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Mutual exchange as a basis for planning and decisions
Whether it makes sense to separate strategic and operational topics among different employees must be considered on a case-by-case basis. However, it is important that the strategic work is not neglected and that there is clear responsibility within the procurement department.
One way to get processes moving without adding new staff is to train and educate employees on strategic topics. Strategic thinking, negotiation skills, and familiarization with new tools are all topics that can be well covered in internal training. Since operational and technical buyers have usually been part of the company for some time, they are usually already familiar with the processes and can implement the new competencies in the existing structures more quickly than newly hired specialists.
The strategic processing and grouping of goods into logical categories enables the strategic buyer to achieve optimum cost prices by means of category management, taking into account the total cost of ownership. Category management is a prerequisite for finding and leveraging savings potential for individual areas and thus assumes a central position for creating a sustainable cost structure.
Logical categories are developed on the basis of the existing procurement data. The essential characteristics of a material group can be summarized on a material group profile. Similarities result, for example, on the basis of:
In a medium-sized company, this usually results in 20 to 30 profiles. These categories are now ideally suited to be optimized in terms of quality, price or delivery reliability. Not all product groups have the same objectives: the individual product groups are considered and analyzed separately. The following questions should be answered for each category:
If you want to take a more "modern" approach, you can also use software to analyze categories instead of physical profiles. For example, you can use Tacto's software to create analyses for the various merchandise groups at the touch of a button. This makes the time-consuming and technically difficult analyses via Excel a thing of the past.
Dealing with suppliers is a central component in the work of every strategically thinking buyer. The high dependency on a solid network has not only become apparent since many raw materials have become scarce. Conversely, good supplier management means good relationship management. The supplier should not be seen as a cost generator in the company, but rather as a value-added partner.
The strategic buyer is the face of the company and is the contact person for all matters. If difficult negotiations or problems arise, he knows who has the decision-making power at the supplier and how to respond to the individual negotiation situation. The common goal of the medium- and long-term partnership is to optimize the value chain as a whole. Despite all the optimization, however, in many cases it makes sense to place the long-term partnership in the foreground and not to jeopardize it for the sake of achieving short-term goals.
Procurement represents the corporate area with the most interdepartmental as well as external interfaces. A strategic buyer has to coordinate with several departments at the same time and maintain an overview.
To enable strategic alignment of the procurement department, it makes perfect sense to maintain regular contact with all relevant departments. Many procurement managers, for example, attach importance to being involved in important management meetings or at least to establishing a regular appointment with the company management.
In addition, close coordination with manufacturing, development and all relevant planning departments makes sense. Strategic buyers are the central interface managers and should position themselves as such in the company. The introduction of regular meetings and planning sessions at monthly or even bi-weekly intervals can make perfect sense.
In many digitization issues, medium-sized procurement is still somewhat left behind by large industrial competitors. The necessary IT resources are often not easy to come by and personnel are lacking at all corners.
However, in procurement in particular, if you want to understand your procurement activities, you need to know the current figures, data and facts. An up-to-date and accurate evaluation of the data is of elementary importance here, especially with regard to the preparation of difficult negotiation talks with suppliers. However, the reality in many medium-sized procurement departments is as follows: The ERP system is still the most used system for data management, followed by Excel. Data management with Excel in particular is demonstrably associated with a high level of effort and susceptibility to errors.
In recent years, a whole range of new software solutions and tools have been added that can offer real added value, especially for medium-sized procurement departments. Especially for strategic procurement, some software developers offer their own solutions that make the use of Excel completely obsolete. With some programs, it is possible to evaluate the existing procurement data at the push of a button, thus avoiding the error-proneness of a self-created Excel analysis and still saving valuable time. Furthermore, there are several solutions for the fast administration and evaluation of supplier data without the use of high mail traffic.
Simplify strategic procurement with Tacto
The software from Tacto, for example, offers all these application possibilities. The special feature here is the special tailoring to the wishes and needs of medium-sized industrial companies. One of our procurement experts will be happy to advise you on this topic.
