Many companies are still struggling to figure out how to implement a Digital Procurement Strategy in 2022. The truth is, 82% of highly digitized companies are now benefiting from data-driven procurement strategies. This is not just a trend, 42% of CPOs now view procurement as a critical priority for their company’s strategic digital transformation. Effective procurement strategies work and it’s more important in 2022 than ever before. In this article, we’ll explore procurement best practices that you need to keep in mind for 2022, and how you should be implementing a digital procurement strategy in 10 steps.
What is a Procurement Strategy?
Definition: Digital procurement is a strategic approach to acquiring goods and services that uses technology to improve the buyer experience, reduce costs, and increase speed. The goal is to make the purchase process as easy as possible for buyers and sellers alike.
To be more specific, a digital procurement strategy is a plan that outlines how to use technology to improve the way you buy products and services. A digital procurement strategy aims to ensure that your organization:
- Achieves the best value for money by selecting suppliers based on their expertise, quality, reliability, and price.
- Responds quickly to changing business needs by easily finding and securing new suppliers.
- Can demonstrate compliance with procurement policies, regulations, and legislation.
Discover how you can simplify your digital procurement process in one easy solution with BizVibe.
With the rising popularity of digital transformation and the growing number of companies that are adopting it, we have witnessed rapid growth in digital procurement and supply chain management. In fact, according to a recent report, the market value of digital commerce will reach USD 9 trillion this year. A digital procurement strategy is an important part of any business strategy because it helps organizations improve their performance and productivity through better asset utilization, increased efficiency, and reduced waste.
Types of Procurement Strategies in 2022
It is important to note that procurement strategies can be adopted by organizations of all sizes. The following types of procurement strategies are common, regardless of the size of an organization:
Cost reduction: This is one of the most common procurement strategies adopted by businesses all over the world. A company can reduce its cost by negotiating with vendors for better deals or by switching to cheaper alternatives in case it already has enough resources in stock.
Risk management: Procurement strategies like risk management help companies to reduce the risks associated with buying products and services from external sources. This process involves analyzing the suppliers’ background, financial stability, and reputation before entering into a deal with them.
Supplier management & optimization: Managing your suppliers well is essential if you want to stay competitive in today’s business environment. You need to optimize your relationship with them by understanding their needs and offering them incentives like discounts if they meet certain standards set by you.
Green purchasing: Green purchasing refers to buying products and services that help protect the environment. For example, organizations can choose to buy electricity from renewable sources or use recycled paper for printing documents.
Global sourcing: Global sourcing refers to buying goods or services from international companies or suppliers. This helps organizations reduce costs as they don’t have to pay for import duties or taxes on imported goods.
Total quality management (TQM): TQM is a management philosophy that aims at improving all aspects related to quality from production to delivery of goods/services and after-sales service as well. It aims at reducing defects, increasing efficiency, and improving employee satisfaction levels through continuous improvement in processes as well as customer satisfaction levels.
Procurement Strategy Matrix 2022
Procurement policies and strategies have a direct bearing on the organization’s performance. The procurement process involves various levels of decision-making, which may vary depending on the size and nature of the organization. It is essential to develop a clear strategy that can be used by all stakeholders to achieve better performance. The procurement strategy matrix is one such tool that can be used to develop an effective procurement policy for any organization.
A procurement strategy matrix is a tool used by organizations to identify the types of decisions that need to be taken at different stages in the procurement process. It helps determine how much emphasis should be given to each type of decision-based on its impact on the overall performance of the organization. This tool provides insights into whether decisions are being made based on relevant criteria or not, thereby helping organizations improve their overall performance through better governance practices.
Streamline your digital procurement with BizVibe. Trused by millions of companies.
10 Steps to Build an Effective Digital Procurement Strategy
A good procurement strategy will help you streamline your processes, improve your operations and reduce costs — all while making sure everyone in your company is getting what they need when they need it.
To help you build a solid digital procurement strategy for your business, we’ve put together this step-by-step guide on how to get started:
Step 1: Identify business needs
The first step in building a successful digital procurement strategy is to determine what your current business needs are. Are there any areas where you’re spending too much money or experiencing delays? What parts of your supply chain need to be strengthened? What products or services do you want to start offering? By answering these questions, you’ll be able to find areas where automation can make the biggest difference for your organization — whether that’s automating processes or streamlining workflows.
Step 2: Implement Procurement Software
Procurement software helps you manage the entire process of buying from a vendor. Not only does this software help keep track of contractors and suppliers, but it can also help with managing spending limits, saving time, and eliminating costs associated with manual bookkeeping.
Procurement software is a key component of any digital procurement strategy. These programs help automate the process of sourcing and purchasing goods and services, making it easier for your company to keep track of all its purchases and spending.
It also helps you manage supplier relationships, which is an important part of creating a robust digital procurement strategy.
- A good procurement software program will allow you to:
- Create purchase orders on the fly. There’s no need to wait until someone has time to create a purchase order when you can just fill out one while on the go using your smartphone or tablet.
- View purchase history and invoices in one place. You can see all your purchases and invoices in one place instead of having to go through multiple files on different devices.
- Track supplier performance over time. You can track how often suppliers have delivered late or failed to meet quality standards so that you can make adjustments as needed when negotiating contracts in the future.
- Search for vendors based on specific criteria such as product type and price range — no more wasting time trying to find what
Step 3: Determine organization spend
The first step in building an effective digital procurement strategy in 2022 is to analyze your organization’s spend on digital goods and services. In doing so, you’ll need to answer the following questions:
- How much do we spend on digital goods and services?
- What are our top vendors?
- What percentage of total spend goes to these vendors?
- How can we improve our spending with these vendors?
Step 4: Evaluate market conditions
Before you jump into digital procurement, it’s important to understand what’s happening in your industry, as well as the broader market.
The best way to do this is by conducting a competitive analysis. This process involves gathering data about your competitors (including their strengths and weaknesses), which you can use to identify opportunities for improvement.
If you don’t have enough time or resources for an in-depth competitive analysis, start with a high-level overview of how other companies are implementing digital procurement strategies.
Step 5: Set measurable objectives
In this Step, we will discuss how to set objectives for your digital procurement strategy.
Objectives are the goals or aims that your organization wants to achieve. They are SMART (specific, measurable, attainable, realistic, and time-bound). The first step in developing a successful digital procurement strategy is to identify the objectives that you want your organization to achieve through the use of digital platforms.
For example, one of the key objectives of a digital procurement strategy could be to improve customer satisfaction. Another objective could be to reduce costs as a result of using e-procurement tools.
Another important objective is to make it easier for suppliers to do business with your organization. This could include making it easier for them to submit bids or proposals by providing standardized templates and forms via an online portal or system.
Step 6: Define Procurement Policies
A policy is a statement of action or plan of action, that is adopted or accepted as a guide to future decisions. You can use your procurement policy as a guide for allocating your spending. This will help you achieve the best possible value from your vendors and suppliers.
If you don’t already have one, now is the time to create one. Your procurement policy should be long-term and include objectives, goals, and key performance indicators (KPIs). It should also include short-term objectives for each year or quarter that are linked to the overall strategy of your organization.
Step 7: Establish Procurement Systems
The next step in building an effective digital procurement strategy is setting up systems that will help you manage your supply chain more efficiently. These systems may include:
Purchase order management – This involves managing all purchase orders electronically (e-POs) or manually (paper POs). A well-managed e-PO system allows you to track every purchase order from start to finish, including when it was created, who approved it, and who received it at the vendor’s end.
Step 8: Formulate a purchasing strategy
Once you’ve got a handle on what you’re looking for, it’s time to develop a procurement strategy. This includes deciding how and where to source, as well as how much it will cost.
If you’re buying in bulk, it’s important to know how many units of each item you’ll need over the next 12 months so that you can forecast your needs. You should also consider whether you want to buy from one supplier or multiple suppliers and whether those suppliers need to be local or international.
If you’re using an auction site like eBay or Amazon Marketplace, then you will need to decide who should bid on your behalf. This can be tricky if there are multiple sellers offering similar products — but there are ways around this too!
Step 9: Create a digital procurement strategy
With an effective digital procurement strategy, you can leverage the power of technology for improved collaboration and cost savings. A well-defined digital procurement strategy will help you take advantage of digital tools in your organization to streamline processes, increase efficiency, and reduce costs.
Digital procurement can help you to improve your competitive advantage by making it easier to engage with customers while providing them with a superior experience. Here are some key aspects to consider when developing your digital procurement strategy:
- Establish goals and objectives. Before you begin implementing any new technology or process, it’s important to understand how it fits into your overall business strategy and what its purpose is within that framework.
- Identify potential benefits of moving to a digital procurement environment
- Assess risks and challenges associated with implementing new technology or process
Step 10: Monitor and Fine-Tune the Strategy
The final step in creating a digital procurement strategy is to execute it. The key to success is to make sure that you have all the right people on board and that they understand their roles. You may want to consider using an internal social network or collaboration platform such as Yammer to communicate with your team during this process.
As you execute your strategy, keep in mind that it’s never too early or too late to make changes — even if they’re small ones — as long as they’re aligned with your goals. It’s important to continually monitor your progress so that you can address any issues before they become major problems.
Procurement Strategy Framework
A procurement strategy framework can help businesses choose among several purchasing methods:
- What to buy. This can be anything from a new piece of software to a new supplier, or even a new country.
- Where to buy it? For example, whether you want to buy domestically or internationally; whether you want to use traditional online auction sites or more complex sourcing platforms; and whether you want to use an open market approach or a more targeted approach.
- Why you’re buying it? This is the most important part of your procurement strategy, but also the most difficult to answer and follow through on. It’s about ensuring that your purchase meets your business needs, aligns with your strategic objectives, and delivers value for money — all of which are incredibly subjective and difficult for anyone other than senior management (and maybe not even them!) to measure objectively against other options available at the time of purchase.
Effective procurement strategies include:
- Investing in digital tools
- Automating processes
- Developing an efficient workflow
- Training employees to use the new tools and processes
- Creating a culture of innovation, continuous improvement, and collaboration between procurement and other departments
- Understanding the cost structure of your organization by analyzing data to identify key areas for improvement and opportunities for cost reduction
- Benchmarking against competitors and industry leaders to understand best practices in procurement that could be implemented within your organization
- Working with suppliers to develop long-term partnerships that can help you reduce costs, improve quality and increase flexibility in future sourcing decisions
- Partnering with procurement organizations or associations at a regional or global level to learn from their experience and share best practices with fellow suppliers
How to Automate Your Digital Procurement Strategy in 2022
Ultimately, it is clear that automation tools offer much to the digital procurement process. Additionally, new analytics-driven cloud platforms are emerging that can integrate data across an organization. While the exact breakdown of roles and listed steps will differ from one organization to the next, this buyer’s guide hopes to assist forward-thinking companies in developing a digital procurement strategy tailored to their own organizations’ needs.
Discover a future-proof approach to procurement with BizVibe’s procurement platform.
