Strategic Procurement is not always separated from operational Procurement in medium-sized companies. The purchasing department is often responsible for both areas, especially in the manufacturing industry, 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 purchasing organization on a stable foundation in the long term and developing it further.

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So what needs to be done to better implement strategic purchasing topics within the department? We have put together five tips for your department below.

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New employees are not always needed

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Whether it makes sense to separate strategic and operational issues among different employees must be considered on a case-by-case basis. However, it is important that strategic work is not neglected and that there is clear responsibility within the purchasing department.

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One way to get processes moving without hiring new staff is to train and educate employees in strategic topics. Strategic thinking, negotiation skills and familiarization with new tools are all topics that can be covered well in internal training. As operational and technical purchasers have usually been part of the company for some time, they are usually already familiar with the processes and can implement the new skills in the existing structures more quickly than newly hired specialists.

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Expansion of product group management

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The strategic processing and grouping of goods into logical Categories enables the strategic buyer to achieve the optimum cost price through 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 therefore plays a central role in creating a sustainable cost structure. 

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Logical Categories are developed on the basis of the existing purchasing data. The essential characteristics of a Category can be summarized on a product group profile. Similarities arise, for example, on the basis of:

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• the supplier portfolio
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• the procurement strategy,
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• similarity in requirements planning and
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• Commonalities in the objectives and implementation measures

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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 Categories have the same objectives: the individual Categories are considered and analyzed separately. The following questions should be answered for each Category :

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• What are the costs and sales prices?
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• What quantities of the primary products belonging to the material group does the company procure and at what prices?
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• What conditions have been agreed with the relevant Category suppliers?
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• How will your own demand, the supply situation and production capacities within the material group develop in the future?
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• What business model do the suppliers within the Category follow?

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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 software to create analyses for the various Categories at the touch of a button. This makes the time-consuming and technically difficult Excel-based analyses a thing of the past.

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Introduction of active supplier management

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Dealing with suppliers is a central part of the work of any strategically-minded 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-adding partner. 

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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 focus on the long-term partnership and not jeopardize it in order to achieve short-term goals.

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Development of the purchasing department as a central interface within the company

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Procurement is the area of the company with the most cross-departmental and external interfaces. A strategic buyer must coordinate with several departments at the same time and maintain an overview.

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In order to enable a strategic alignment of the purchasing department, it makes sense to maintain regular contact with all relevant departments. Many purchasing managers, for example, attach importance to being involved in important management meetings or at least establishing a regular meeting with the company management. 

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Close coordination with production, development and all relevant planning departments also makes sense. Strategic buyers are central interface managers and should position themselves as such within the company. The introduction of regular meetings and planning rounds on a monthly or even fortnightly basis can make perfect sense.

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Driving digitalization forward

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Medium-sized Procurement companies are still somewhat left behind by large industrial competitors when it comes to many digitalization issues. The necessary IT resources are often not easy to come by and there is a lack of personnel everywhere. 

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In Procurement in particular, however, if you want to understand your purchasing activities, you need to know the latest facts, figures and data. An up-to-date and accurate evaluation of the data is of fundamental importance, especially when it comes to preparing for difficult negotiations with suppliers. However, the reality in many medium-sized purchasing departments is as follows: The ERP system is still the most frequently used system for data management, followed by Excel. Data management with Excel in particular is demonstrably very time-consuming and error-prone. 

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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 companies. For strategic Procurement in particular, some software developers offer their own solutions that make the use of Excel completely obsolete. With some programs, it is possible to evaluate existing purchasing data at the touch of a button, thus avoiding the error-prone nature of a self-created Excel analysis and saving valuable time in the process. There are also several solutions for quickly managing and evaluating supplier data without the need for a lot of mail traffic. 

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Simplify strategic Procurement with Tacto

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The software from Tacto, for example, offers all these application options. Its special feature is that it is specially tailored to the wishes and needs of medium-sized industrial companies. One of our purchasing experts will be happy to advise you on this topic.

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Mid-sized Procurement and its importance for the manufacturing industry are still underestimated. 5 important tips for mid-sized companies in strategic Procurement.