Procurement Approach: Your Needs in Supplier Relationship Management

Procurement approaches refer to the strategic methods that a company implements. Understanding how to take various paths in procurement is crucial for consistent development. 

A procurement professional may have one or another way to navigate procurement. Luckily for you, I can share my years of experience as a procurement manager. Stemming from upskilling 200+ procurement teams, I’ll provide you with seasoned insights. 

Through this article, I’ll provide you with the basics of the procurement approach. I’ll also tell you why it is important to have a dependable approach for your SRM. Moreover, we’ll include two approaches from a study that established today’s hallmarks. 

Without any more questions, let’s go into the details! 

What is a Procurement Approach?

A procurement approach refers to strategic planning or a method of company acquisition. Simply put, It’s the pre-procurement game. It accounts for identifying procurement needs and supplier selection.

It also includes contract negotiation and eventual supplier relationship management. The approach pushes through organizational goals and budgeting. You can do it if you have the resources.

Of course, the procurement approach, at its core, ensures the best procurement value. It involves careful market analysis, defining procurement goals, and determination of best practices. The procurement approach also includes ethical considerations and standards regulation.

It’s a crucial process for managing costs and overall operational efficiency. It’s also vital to align the procurement approach with the company’s general goals. It avoids confusion, miscommunication, and overlapping concerns. 

Why is the Procurement Approach Important?

A clear and definite procurement approach is essential for stable functioning companies. It influences how they operate and maintain cost-effectiveness. 

It’s a way for organizations to ensure they can maximize procurement value. The process is crucial for a company’s profitability and overall competitiveness.

The procurement approach emphasizes the importance of cost management. It’s a way for the company to have a better grasp of financial-related matters. It can be deal negotiations, budget management, and expense control. It’s a cost-saving process that can ultimately help the company’s development.

The procurement approach also considers quality control in the procurement process. Steps include supplier relationship management and logistics control. The procurement approach extends through customers and the way the company manages them.

This aspect of procurement is a critical factor that ensures alignment and consistency. A dependable procurement approach is vital because it’s a driver for efficiency. More importantly, it displays the company’s grit and strategization toward procurement.

Why is it ideal for Supplier Relationship Management?

A definite procurement approach is ideal for SRM because it provides structure. It organizes a framework for SRM to guide it in supplier interaction. A clear procurement approach means stable and consistent supplier relationship practices. 

It sets clear expectations and standards for partner suppliers through a framework. This defined framework establishes clarity, delivery, and field performance. It enables trust and transparency while maintaining smooth operations. 

The procurement approach also facilitates communication and collaboration efficiently. The incorporation of such practices enables supplier relationship management to be smooth sailing. An ideal procurement approach also organizes suppliers according to their functions. It clarifies their roles and functions within the company process. 

An ideal procurement approach makes supplier relationships feel dependable. It’s far better than considering the supplier relationship as something ‘transactional.’ This humane consideration makes negotiations better and more favorable. 

Consider it as something that enhances procurement reputation. It’s a matter of fact that provides a strong foundation for value-driven objectives. An ideal procurement approach, overall, leads to better supplier relationship management.

The Two Approaches in SRM

Supplier Relationship Management requires careful and attentive steps to ensure efficiency. In 1998, Daniel Krause spearheaded a study of two approaches to SRM. These two approaches were the Strategic and Reactive Approaches. 

Currently, supplier relationship management considers these two key approaches. It enables a smooth and efficient process flow. Now, we’ll be discussing these key approaches and how they can make your SRM more efficient. This way, you’ll learn which approach is more suitable for you. 

1. Reactive Approach

The reactive approach focuses on ‘response’ or ‘reaction’. It’s a handling method that focuses on facing challenges as they occur. Procurement teams engage with suppliers or concerns based on disruptive occurrences. This approach mainly uses rapid-recovery methods that reduce immediate consequences. With this regard, the reactive approach provides short-term resolutions in SRM. The dynamic responsiveness of this procurement approach makes it effective for unexpected concerns.

Consider its benefits through these three things:

• Quick response to Supply Issues/Concerns
• Procurement flexibility
• Less concern with depleting resources and extra effort.

However, it has its disadvantages which are:

• Short-term focused
• Crisis management focus, meaning more on reaction instead of prevention.
• Missing potential opportunities.

Knowing these considerations can help you understand if you need the reactive approach. 

2. Strategic Approach

The strategic approach is the proactive one, focusing on anticipating supplier concerns. It tackles active engagement and focuses on providing long-term supplier management. It’s a strategic implementation that prioritizes communication and collaboration. This way, you can enforce your foundation with your supplier through actionable insights. It’s a way to integrate these opinions while leveraging the process.

This approach provides the following benefits:

• Cost reduction by minimizing disruptions.
• Long-term value creation by facilitating strategies.
• Promoting innovative actions and efficiency gains.

However, the approach is limited by:

• Extensive research efforts
• Availability of resources required for implementations.
• Change resistance due to strategic incompatibilities.

The strategic approach is a crucial and valuable addition. However, its complexity proves a challenging hurdle that one must overcome. This way, you can understand how the strategic approach can lead you to success.

Overall, these two approaches serve purposes that can make or break your procurement. Take into consideration how they benefit and limit your movements. Understanding these key traits enables you to maximize them. 

Aligning Procurement Approach to Long-Term Objectives

One vital aspect to consider for procurement approaches is that they must be aligned. They should match your long-term goals for your company. It’s an essential step that ensures sustainability, growth, and continuity.

A great procurement approach considers the wider spectrum of the company’s objectives. Align your goals with your procurement approach through a cohesive and well-thought plan.

Consider how it can support innovative processes and the changing market trends. Most importantly, account for your business resiliency. This way, you can set your procurement approach towards a more robust inclination. Ensure that the approach matches common objectives and contributes to strategic direction.

Having a procurement approach also helps build supplier trust and loyalty. It happens because you consider these partners in the long run of your business. Matching your procurement approach with overarching goals ensures competitiveness and resiliency among peers.

Conclusion

In conclusion, a great procurement approach ensures a successful SRM. The strategic alignment of approaches toward long-term goals fosters sustainable goals. It also enhances value between partners and suppliers.

It’s a comprehensive strategy that integrates management and quality control. Of course, it also emphasizes ethical considerations and industry standards regulation.

Be it the reactive or strategic approach, understanding when to implement is key. It ensures that you can address the needs and dynamic operation of your company.

Always remember how a well-defined procurement approach leads to better trust and collaboration. Doing so enhances drive, efficiency, and competitiveness.

Moreover, always take into consideration the ever-evolving market. This way, you can maintain resiliency and establish value-driven relationships with your suppliers.