6 Ways to Improve the “Strategic” in Your Strategic Procurement Plan

As a procurement professional, improving the value you provide to your organization should be at the top of your to-do list.  This includes developing a strategic procurement and sourcing plan to implement.

To help you determine how to go about making your procurement plan as strategic as possible, we’ve compiled a list of 6 ways to enhance your strategy that will bring tactical value to your procurement services.

  1. Commit to Enriching Your Partnerships with Your Finance, Contracts, Legal and IT Architecture Teams

Your relationships within your organization are just as important as your relationships with your external suppliers and service providers.  Strong relationships with your finance, contracts, and legal teams are obvious table stakes for a strong procurement organization.  Connecting with these groups to understand their objectives will ensure alignment in your sourcing events.

However, don’t discount the value of also connecting with your IT architecture team.  Architects are constantly evaluating the ever-expanding base of new technologies, solutions and leading-edge development platforms.  But they also evaluate current technologies and make recommendations on where to consolidate, what technologies to standardize on and what technologies to sunset.

Establishing or improving your relationships with your architecture team helps to inform procurement with insights on what vendors to consider when sourcing new technologies, what relationships will grow (including what areas and when), as well as what relationships and technologies have an expiration date.

These data points empower procurement with negotiation leverage on pricing, discounts, contract terms, and renewals.  Commit to engagement with your architecture team, as well as the other teams at your organization that will help enhance your procurement strategy, to review their technology roadmap and share your views of aggregated third-party demands.

  1. Determine the Budget to Identify Vendor Spend

Budgets are often developed in aggregate, meaning they are established at the cost center or project level.  Additionally, these budgets are usually developed with placeholders that account for the third-party dollars needed to purchase hardware, software, subscriptions, and services, and to pay maintenance costs.  The descriptions of the projects are often described at very high levels such as to purchase an order entry system, replace an aging hardware platform, acquire the resources to staff a project, or support a system.

While finance organizations focus on reviewing, securing approvals and allocating OpEx and CapEx dollars to build a budget, they often don’t engage procurement early in that process, if at all.  Often the procurement team is engaged only once the approved projects kick-off and only to assist in sourcing the needs of the project itself.

Analyzing the full project portfolio and committing time to review each project and cost center budget to decompose the budgeted dollars for hardware, software, subscriptions, and third-party labor will help to identify 80-90% of all projected spend.  In some instances, you may only be able to identify what vendors each project is considering, but not how much would be spent with each.  In other instances, you may identify that the technology itself has not been selected.

In these cases where an RFP, or even an RFQ followed by an RFP, is needed to select the technology, you can still attempt to identify some of the potential vendors in play.  Completing this exercise takes time and may reveal some uncomfortable details about your projected spend, but the insights you derive will pay dividends across all your sourcing and even your renewal activities throughout the year.

When you pair these project-based projections with your view of the IT architecture team’s technology roadmap, you will have two of the four key inputs to build your sourcing plans for the remainder of the year.

  1. Aggregate Your Demand

It may seem too obvious a next step to take the resulting, decomposed demand by project and roll that up into an aggregated view, but that is exactly what you should do.  Even more importantly, resolve to share the results and confirm the timing of the demands with your primary stakeholders and IT leaders.

Aggregate more than the dollars by vendor.  Instead, aggregate the number of RFP’s projected, the number of licenses needed, and the project resources required, and then break those numbers down by quarter.

  1. Build Out or Refresh Your Vendor Profiles

To get your procurement strategy started on the right foot, transformation program leaders need to develop a comprehensive sourcing strategy in collaboration with their procurement and IT teams.  One way to do that is to update (or for some, to create) vendor profiles that include fiscal year calendars, market penetration, quarterly financials, various market intelligence on the vendor, and the vendor’s current performance at your organization.

This collection of vendor profiles is the fourth and final key input to building your sourcing plan.  Allotting time to refresh this information will help you complete your plan and strengthen your negotiations throughout the year.

  1. Review your Existing Agreements for Currency to Terms, Pending Expirations and Renewals

In the heat of an immediate need to purchase more licenses or to process a renewal, you realize the Master Agreement has expired or doesn’t have the latest Security Services rider or Medicare Part D addendum.  You can’t complete your purchase until these items are addressed.  Resolve now to review all agreement end dates and determine what terms need to be updated based on the evolving market.

Connect with your contracts and legal teams to ensure you have the most up-to-date Master Agreement terms available and separate these updated terms into “must haves” and “nice-to-haves.”  Factor in the time to address these base agreement updates outside the critical path of sourcing events as you build your sourcing plan.

  1. Start Building Your Sourcing Plan

If you haven’t completed your sourcing plan or even started to build one yet, there’s no time like the present.  Don’t feel pressured to develop your plan all at once – build your sourcing plan in stages.  First, lay out your RFPs throughout the year, keeping in mind your procurement team capacity and broker adjustments to schedules based on what is achievable.

Second, lay out your critical path renewals where contracts are approaching expiration or mandated contract updates are required by your contracts and legal teams.  Once complete, balance alignment of remaining sourcing events by internal need dates while factoring in the provider fiscal year end and quarter ends to maximize your leverage.  Lastly, fill in those activities that support currency of contract terms, updates to amendments or other desired changes.

Bottom Line

As we approach the mid-way point in the year, it is critical for your procurement team to start collaborating with your other IT and legal teams to ensure an efficient sourcing strategy.  Once you lay the foundation for a successful procurement plan, your organization will be able to better collaborate with your vendors and improve the value received through their procurement projects throughout the rest of the year.

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