Procurement & Strategic alignment

In this article about Procurement & Maturity Assessment , I talked about strategic alignment as an important factor to consider. But, I didn't define it and?feel that it is important to do so.

What is strategic alignment for Procurement?

Strategic alignment for procurement refers to the process of aligning your procurement activities and strategies with the company's overall business objectives and goals. It involves ensuring that you are not just a tactical operation focused on cost savings and transactional activities, but also a strategic partner that contributes to long-term successes. It involves integrating with the broader strategic goals, enabling your team to contribute to value creation, innovation, risk management, and overall business success.

Why is it important?

Whether you talk about maturity, organizational structure or category management (amongst other things), this alignment is critical. Understanding the business objectives is the prime driver that will allow your strategies to be developed in a way that directly supports the broader business goals of the organization. This should involve understanding the company's growth plans, market expansion strategies, and product development initiatives. The following elements will be built from this understanding:

• Cost Management: While strategic alignment goes beyond just cost savings, effective procurement practices will be built to support cost management efforts targeting specific areas.
• Risk Management: Procurement needs to consider the company's "risk appetite" and assess from the business objectives the potential risks in the supply chain and the?evolution of those.
• Innovation and Quality: We can contribute to innovation by collaborating with suppliers to identify new technologies, products, or processes that can enhance the organization's offerings. To be effective and target the right areas, we need to understand the business's long-term objectives.
• Sustainability and Ethics: Sustainability goals and ethical standards are increasingly important. Those elements of the company's?strategies?will help to align processes to?select suppliers that share your organization's values.

To be relevant and seen as a value-adding function, you need to align your procurement functions to the company's strategic objectives.

How do you ensure you are aligned with your company's?strategic?objectives?

Ensuring that procurement is aligned with a company's strategic objectives involves a combination of careful planning, communication, collaboration, and ongoing monitoring. Here are few elements on how to achieve this alignment:

1. Start by gaining a deep understanding of your company's strategic objectives by studying its mission, goals, and key initiatives, while seeking clarity with relevant stakeholders.
2. Translate this into relevant context for building your procurement strategies.
3. Establish measurable KPIs that directly tie into the company's strategic goals. These KPIs could include metrics related to cost savings, revenue growth, supplier performance & innovation, risk management, and sustainability.
4. Foster open communication between procurement, senior management, and other relevant departments. Regularly ask for updates on company strategy, and provide insight into how procurement activities are contributing to those goals.
5. Ensure that you and your team are effectively working?closely with other departments, such as finance, operations, and R&D, to ensure that you support their needs and objectives.?
6. Regularly review and evaluate the procurement strategy and its alignment with company goals. Adjustments may be necessary due to changes in the business landscape or shifts in strategic priorities.
7. Invest in training and developing your team to ensure they understand the company's strategy and can effectively execute procurement activities that align with it. Include as well stakeholder engagement refreshers.
8. Gain support from top executives to reinforce the importance of aligning procurement with strategic objectives. Having executive backing can help overcome challenges and ensure resources are allocated appropriately.

Remember that alignment is an ongoing process, not a one-time task. Regular reviews, adjustments, and communication are key to maintaining a strong alignment between procurement and the company's strategic objectives.