On Procurement Strategy Development

It is difficult to talk about procurement planning without mentioning procurement strategy, because procurement strategy is developed in conjunction with and during the procurement planning phase and is a key factor in determining the most appropriate procurement method given the complexity and monetary value of the requirement, and market availability.

While procurement planning deals with “when”, procurement strategy looks at “what”, “how”, “where” and “why”; which need to be decided before the ‘when”.

1. Why buy it?
2. How to buy it?
3. What is the objective of the purchase?
4. How much does it cost?
5. Where can it be sourced?
6. How many sources are available?
7. What is the risk?
8. What is the benefit?

But even after a preliminary procurement plan is developed, there are still further strategic questions that need to be answered, such as:

1. Does the procurement process need expediting?
2. Are there opportunities for packaging requirements in order to purchase in bulk?
3. What are the monetary or strategic advantages/disadvantages of grouping requirements?
4. Are there any dependent requirements?

The above list of questions is not exhaustive.

A procurement strategy can be developed for one requirement or a group of requirements, and although the development of a procurement strategy is important when planning procurements, the extent of the strategy developed is dependent on the level of risk and monetary value of each requirement.

The strategy that is developed must take into consideration the various procurement principles; primarily, economy and efficiency. Consideration needs to always be given to whatever savings (or economies of scale) can be achieved by strategically planning how procurements will be carried out.

This might entail consulting with the various requesting entities to determine if there are any extenuating circumstances that warrant making their purchases in a special manner and in any way different from the rest of the planned procurements of similar items.

Requesting entities should also be involved and consulted on whatever decisions are made in the planning and strategy phase, to obtain their agreement and to avoid planning their requirements in such a manner that could be counterproductive to their operations.

For example, although there might be a need to purchase a total of 10 vehicles by consolidating 3 requirements, one requesting entity might have valid reasons why their vehicle should not be purchased in bulk, because they need to receive the vehicle in a shorter period than it would usually take depending on the procurement method used. So, this requirement (after having consulted with the requesting entity) might need special attention, which could be reflected in the requirements of the package or be purchased using a different procurement method which would permit this requesting entity to receive their vehicle ahead of (and in a separate shipment) from the other vehicles purchased in bulk.