Step 2 - Developing a strategic procurement vision

Step 2: Developing a strategic procurement vision

Why develop a Strategic Procurement Vision and align it with Business Strategy?

2.1 Alignment with Business Strategy

2.1.1 Supporting Growth Strategy

2.1.2 Integrating Long-Term Vision?

2.1.3 Engagement and communication with management?

2.2. Defining Procurement Goals

2.2.1 Contribution to revenue growth?

2.2.1.1 Supporting Sales and product portfolio?

2.2.1.2 Strategic partnerships and innovation?

2.2.1.3 Risk management as revenue protection?

2.2.1.4 Value creation through Data and Artificial Intelligence (AI) usage?

2.2.1.5 Improving customer satisfaction through delivery time and quality?

2.2.1.6 Developing revenue-related KPIs?

2.2.1.7 Resell and Cross-Sell Opportunities?

2.2.1.8 Exclusive distribution deals?

2.2.2 Cost savings?cost

2.2.3 Sustainability and Corporate Social Responsibility (CSR)?

2.2.4 Risk reduction?

2.2.5 Innovation and collaboration?

Joint Development Agreements (JDAs)?

Early Supplier Involvement (ESI)?

Suppliers as innovation incubators?

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Step 2: Developing a strategic procurement vision

With insights gained from the procurement analysis (Step 1), I have formulated a strategic vision for the procurement function in Step 2. Lets start with the “why” again first:

Why develop a Strategic Procurement Vision and align it with Business Strategy?

A strategic procurement vision provides a unified direction, linking procurement goals with the company’s core ambitions. This alignment allows procurement to proactively support business objectives like market expansion, customer satisfaction, and long-term profitability.

Furthermore, aligning procurement with business strategy enhances decision-making, enabling the organization to respond swiftly to market changes, leverage innovation, and mitigate risks in the supply chain.

In essence, developing a strategic procurement vision transforms procurement into a key driver of sustainable growth and competitive advantage, fostering a cohesive approach that supports both current goals and future aspirations.

?In this step, I distinguish between two main aspects that determine how the procurement strategy both supports and strengthens business goals:

Alignment with Business Strategy?

Here, we focus on how procurement goals are aligned with the core ambitions of the company, such as growth in new markets, sustainable partnerships, and management engagement. Through this close alignment, procurement contributes to strategic business goals that go beyond mere cost savings.

Defining Procurement Goals?

Next, I have attempted to define concrete procurement goals that bring the vision to life. Examples include goals to drive revenue growth through strategic partnerships, innovation, and customer-focused sourcing strategies; achieving sustainable business goals; and managing supply risks. By developing a strategic vision that encompasses these elements, the procurement function transforms into a true partner in realizing commercial opportunities and strengthening the organization’s market position.

2.1 Alignment with Business Strategy

To fully leverage the strategic value of procurement, procurement goals must align seamlessly with the overall business strategy. This means that procurement isn’t solely focused on cost reduction but contributes to broader business objectives such as growth, sustainability, and innovation. Below, I highlight several key focus areas that I have applied in the past for strategic alignment within procurement. While there may be many areas to consider, I limit myself to these three:

2.1.1 Supporting Growth Strategy

For companies looking to expand their market position, procurement plays a crucial role. It is essential to first determine the “Why” behind this expansion before making strategic choices. This means that procurement should focus not only on cost savings but also on supporting broader strategic goals, such as sustainable growth and strengthening competitive positioning.

The “Why” forms the foundation of every strategic decision, ensuring that chosen partners and suppliers align with the company's deeper ambitions. For example, when an organization enters a new region, the “Why” behind this step might be to increase brand awareness, respond more quickly to local trends, or better serve specific customer segments. With this “Why” clearly in mind, procurement can actively seek local partners that promote cost efficiency while also fostering a deeper market connection, while global suppliers ensure a stable and consistent supply chain.

For instance, a client with growth plans in Asia anchored the “Why” of this expansion—such as increasing impact in a fast-growing market—which led to a procurement strategy focused on forming close partnerships with geographically distributed suppliers able to respond quickly to market fluctuations. This approach resulted in a stable, scalable supply chain that supported a successful market expansion.

Determining the “Why” not only makes procurement decisions more goal-oriented but also ensures a strategy that remains consistent with the organization’s long-term vision. This way, procurement becomes a catalyst for sustainable growth and strategic market positioning.

2.1.2 Integrating Long-Term Vision?

Long-term vision in procurement means that decisions align with the company's values and objectives. An example is a multinational with strong sustainability goals working with suppliers who contribute to CO? reduction. We chose partners committed to sustainable energy and circular production processes, making procurement a core part of the sustainability strategy and enabling the company to effectively pursue its long-term ambitions. This approach also builds customer loyalty by establishing a strong, transparent reputation for responsible business practices.

2.1.3 Engagement and communication with management?

Effective strategic procurement requires the involvement not only of the procurement team but also of senior management to ensure a shared vision and consistency. Procurement can add value only when management is actively involved in setting strategic goals and priorities. By setting the course with management and regularly evaluating it, procurement becomes not only more responsive but also better aligned with the changing needs and ambitions of the organization.

One effective way to ensure this engagement is by building in regular feedback sessions and joint strategic planning moments. These sessions provide a platform to discuss new developments, risks, and opportunities in the market and adjust the procurement strategy as needed. This way, management can see strategic changes in business objectives reflected directly in procurement decisions, increasing trust and support for the procurement department.

For example, in a technology company, I organized monthly strategy meetings with C-level stakeholders to jointly review procurement goals and KPIs. By encouraging open dialogue and keeping senior management informed about market dynamics and operational challenges, we could flexibly adjust the procurement strategy to new priorities or market opportunities.

This engagement also provides a platform to propose innovative ideas and strategic initiatives that go beyond cost savings. Management involvement increases the likelihood that these proposals are taken seriously and supported. Strong backing within the executive team means that the procurement department not only receives resources to carry out projects but also gains the authority to take a leading role in achieving company-wide strategic goals, such as reducing risks, strengthening relationships with strategic suppliers, and promoting sustainability.

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?2.2. Defining Procurement Goals

A clear and ambitious set of procurement goals forms the core of the strategic procurement vision. By aligning these goals with the business strategy, procurement becomes a critical link in achieving overall business objectives. The key procurement goals are outlined below:

2.2.1 Contribution to revenue growth?

Today, procurement plays an increasingly strategic role and can contribute to revenue growth in various ways, beyond achieving cost savings. The focus is shifting from savings alone to a broader, value-driven approach that aligns with the company's overall goals and creates new commercial opportunities.

2.2.1.1 Supporting Sales and product portfolio?

By working closely with Sales, procurement can help develop a portfolio of products and services that enhance customer value and increase revenue potential. For example, sourcing third-party products or services that can be offered as complementary or integrated solutions to customers expands the company's offerings and creates new sales opportunities.

2.2.1.2 Strategic partnerships and innovation?

Forming partnerships with innovative suppliers allows procurement to contribute to a more diverse and attractive offering. This approach enables the selection of suppliers that add value through technology and innovation, not only driving product development but also attracting new customer segments. These partnerships can also lead to co-branded products that reinforce a premium market position.

2.2.1.3 Risk management as revenue protection?

By effectively managing third-party risk, procurement protects not only the company’s reputation and supply security but also plays a role in safeguarding revenue. Regular monitoring of supplier risks and financial health helps ensure a stable supply chain, essential for meeting customer expectations and protecting revenue. While not always directly visible as revenue growth, risk management is crucial for maintaining customer satisfaction and brand loyalty.

2.2.1.4 Value creation through Data and Artificial Intelligence (AI) usage?

Utilizing AI and data analysis, procurement can make a powerful strategic contribution to organizational growth. AI enables insights that would otherwise remain hidden, empowering the procurement team to make proactive, data-driven decisions that provide a competitive edge.?For example, using AI to predict trends in customer demand by analyzing historical and external market data can reveal patterns that indicate shifting needs or emerging product categories. This insight allows procurement to collaborate with suppliers who align with future trends, preparing the organization for market changes. AI also supports real-time supplier performance monitoring, helping to build strong partnerships with those who meet the highest quality standards. Additionally, AI can uncover new cost-saving opportunities beyond traditional price negotiations, enabling proactive cost management that maximizes profitability without compromising quality or reliability.?The use of data and AI enables procurement to plan strategically beyond the present, transforming it into a data-driven partner that contributes to revenue growth and risk management, making it a valuable asset in a dynamic market.

2.2.1.5 Improving customer satisfaction through delivery time and quality?

Through strict supplier selection and evaluation, procurement ensures consistent high quality and reliable delivery, directly enhancing customer satisfaction. By focusing on timely delivery and quality guarantees, procurement supports long-term customer loyalty, which in turn drives revenue growth.

2.2.1.6 Developing revenue-related KPIs?

By defining revenue-related KPIs and reporting them regularly to management, procurement makes its added value to the organization more visible. These KPIs shift the focus from cost savings to strategic initiatives that boost revenue and provide a competitive advantage.?Examples include the impact of procurement on time-to-market for new products. By collaborating closely with suppliers, procurement can accelerate development and production processes, bringing new products to market faster. A KPI such as "reduction in time-to-market" highlights how effectively procurement supports product launches and helps management understand procurement’s role in the growth process.

2.2.1.7 Resell and Cross-Sell Opportunities?

As mentioned above, procurement can play a strategic role in discovering resell and cross-sell opportunities with products or services from external suppliers that complement the company’s portfolio. By offering these options, procurement creates additional revenue streams through long-term customer relationships.?For instance, an IT company could offer third-party security solutions alongside its own software, providing customers with a more comprehensive, integrated package that enhances value and increases the likelihood of repeat purchases.

2.2.1.8 Exclusive distribution deals?

Exclusive distribution deals offer organizations a unique chance to stand out in the market and create value beyond traditional procurement advantages. By securing exclusive agreements with selected suppliers or innovative startups, procurement can access unique products, technologies, or services unavailable to competitors, building competitive advantage and attracting new markets.

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2.2.2 Cost savings?

Cost reduction remains one of the most traditional and essential procurement goals. Based on the results of Step 1 (Procurement Analysis), specific objectives can be set, such as achieving a 10% saving on indirect procurement. Procurement can also leverage economies of scale by reducing the number of suppliers in certain categories, thereby supporting profitability and financial health.

2.2.3 Sustainability and Corporate Social Responsibility (CSR)?

For many organizations, sustainability has become a strategic focus, with procurement playing a crucial role in achieving sustainability goals. By working strategically with suppliers and making conscious choices, procurement can reduce the company’s ecological footprint and contribute to its social responsibility.

a.? Increasing the Share of Sustainable Suppliers?

By incorporating specific sustainability criteria into the supplier selection process, procurement can increase the share of sustainable suppliers. For instance, a goal could be to have 50% of suppliers CSR-certified within two years.

b.? Procuring Environmentally Friendly Materials?

By prioritizing the procurement of recycled or biodegradable materials, procurement contributes to a circular economy.

c.? Minimizing the CO? Footprint in Transport?

By collaborating with logistics partners using cleaner transportation options, such as electric vehicles, procurement can significantly reduce emissions. A specific objective could be to shift 50% of transport volume to CO?-neutral logistics services within three years.

2.2.4 Risk reduction?

Supply chain risk management is essential, especially for companies dependent on a limited number of suppliers. Third Party Risk Management (TPRM) is a critical task for procurement, focusing on identifying, evaluating, and mitigating risks associated with external suppliers. This approach includes mapping critical suppliers in deeper supply chain layers, such as Tier 2 and Tier 3 suppliers.

Mitigation plans enable the company to respond quickly to disruptions caused by natural disasters, political instability, or pandemics. Such plans might involve multiple geographically distributed suppliers for critical components to reduce dependence on a single location or country.

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2.2.5 Innovation and collaboration?

For innovation-driven companies, procurement plays an essential role in fostering product development by forming strategic partnerships with innovative suppliers. Close collaboration in R&D and technological advancement enables procurement to enhance the existing product portfolio and support joint innovation projects that quickly respond to changing market needs and capitalize on new technologies.

Examples of procurement as an innovation partner include:

Joint Development Agreements (JDAs)?

Procurement can facilitate joint development projects through JDAs with suppliers with advanced technologies or specialized expertise. In the automotive industry, for instance, car manufacturers work with battery technology suppliers to develop new, sustainable battery solutions.

Early Supplier Involvement (ESI)?

By involving suppliers early in the product development process, procurement contributes to more efficient product development and cost savings.

Suppliers as innovation incubators?

Procurement can identify and support innovative startups specializing in emerging technologies. By engaging in strategic partnerships and actively involving suppliers in innovation processes, procurement becomes a leading force in product development. This helps the organization quickly adapt to technological changes in the market and leverage a broader knowledge base.

In conclusion, developing a strategic procurement vision that aligns with business goals elevates procurement from a transactional function to a strategic partner, driving growth, innovation, and sustainability. By defining clear, purpose-driven goals, procurement can proactively support key business ambitions like revenue growth, risk management, and corporate responsibility. This approach not only enhances procurement’s value within the organization but also positions it as a catalyst for long-term success, resilience, and competitive advantage in an evolving marketplace.

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