Procurement and supply chain management can be incredibly complex and critical for project success, especially in construction – where there are layers of subcontracting parties.
When dealing with complexity it always pays to take a strategic approach. A documented strategy demonstrates that a thorough assessment of the available options has been conducted, it guides decision-making, improves productivity, increases efficiency and provides a framework for evaluation and benchmarking.
Defining the procurement strategy your organisation adopts helps deliver more predictable outcomes on time and on budget.
The two broad strategies we’ll discuss here are Project Procurement and Category Management. As with any procurement exercise both strategies aim to optimise time, cost and quality, but their approaches differ.
A project procurement strategy performs procurement activities on a project-by-project basis. Requirements are planned, budgeted, sourced, approved and received for each project individually.
A category management strategy looks at procurement across several projects and takes advantage of economies of scale by consolidating procurement activities on a category-by-category basis. Similar requirements across projects are aggregated into a category, then vendors sourced to meet the requirements for the entire category.
Strategic sourcing is often discussed as a procurement strategy, but in this context it’s considered an essential process that should be part of any procurement strategy.
Strategic sourcing is a formalised, data-driven approach to the upstream activities of procurement: needs and spend analysis, vendor discovery and RFx, negotiations, contract award, and lastly optimisation.
The strategic sourcing process should take place in both project procurement and category management and will help identify where and when each strategy should be adopted.
A project procurement strategy focuses on managing compliance, risk, cost and quality within the constraints of a particular project. Once the design and requirements for a project have been specified, the procurement team will strategically source vendors.
Project procurement is fast, flexible and can easily adapt to changing circumstances or irregular requirements.
A category management strategy aims to consolidate procurement activities and vendors by aggregating products or services with similar characteristics. If spend analysis indicates that there are opportunities for category management, relevant categories are created and their procurement follows a category management process.
Category management allows procurement professionals to develop category expertise, creates economies of scale and fosters stronger relationships with suppliers.
While there are strategic benefits to category management there are operational considerations to take into account when deciding how to plan and structure procurement activities. It’s important to note that these strategies aren’t mutually exclusive, categories can be created and managed where there are opportunities and project procurement can be adopted elsewhere.
Through strategic sourcing, organisations can document the nuances of categories and develop insights into how to strategise procurement processes.
As enterprise level vendor management software, Felix is robust and can be customised to support any procurement strategy. Felix can be configured to suit a wide range of procurement processes and integrates with ERPs and third-party applications to enhance existing capabilities.
The Vendor Management module helps with:
The Procurement Schedule module provides procurement visibility across projects to help with project procurement, budgeting, planning and reporting.
With the various modules working together seamlessly to create a single source of truth, stakeholders - from operations to finance and executives - benefit from connected procurement planning and execution.
By capturing all related data in Felix, you can then export this to business intelligence tools. Having a view of procurement across different projects within an organisation helps conduct spend analysis, identify opportunities for consolidation and make more informed and strategic purchasing decisions.
Want to see Felix in action? Feel free to request a demo here.
Recently, I had the pleasure of interviewing Glen Ercegovich from Primero - a Felix customer. Here is a recap of some of the highlights from the session.
As procurement operations evolve by adopting new technology and using efficient workflows, an important outcome is the ability for real-time reporting. Historically, reporting data had to be compiled manually, consolidated, analysed, and then reported on. Today, compiling and consolidating can be automated so that more time can be spent analysing data and generating insights.
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