How to create a strong procurement strategy for business success

Procurement might sound like just another business buzzword, but it’s actually the backbone of any successful business. Having a well-thought-out procurement strategy in place to source materials, services, or products can save money, improve your efficiency, and leave room for flexibility at the same time. But how do you build one that works well?

This guide breaks it down step-by-step so you can create a solid procurement plan that delivers real results – for both business owners and procurement specialists.

Here’s what we’ll cover:

• The framework of a procurement strategy
• Step-by-step instructions to set up an effective strategy
• Key types and components of procurement strategies
• Why procurement strategies are important for business success
• How to align procurement goals with business goals
• The growing importance of automation in procurement

By the end, you’ll have everything you need to turn procurement into a competitive advantage for your business.

Framework of a procurement strategy

A successful procurement strategy starts with a clear framework. Think of a procurement strategy as your game plan for managing how your business purchases goods or services. The framework is the blueprint that keeps you on track and helps you make smart spending decisions.

Key components of a procurement framework:

• Clear Goals: Clearly define what you want to achieve—cost savings, ethical sourcing, or supplier diversity, for example.
• Policies: Set rules and guidelines for making procurement decisions to stay consistent and compliant.
• Performance Metrics: Use benchmarks to measure success—like cost reductions, supplier reliability, or operational efficiency.
• Risk Management: Plan ahead for potential issues like delays or supply chain disruptions.
• Technology Integration: Use procurement software or workflows to streamline the process.

Steps to setting an effective procurement strategy

Creating a robust procurement strategy isn’t one-size-fits-all, but these steps are a tried-and-true starting point.

1. Understand your business needs

Start by looking at what your company really needs. Is your goal to cut costs, improve quality, or maybe both? Take time to align procurement goals with bigger business priorities, like expanding into new markets or increasing sustainability efforts.

2. Analyze your current procurement process

What’s working? What’s not? Analyze your current procurement system to spot inefficiencies or gaps. For example, are your suppliers meeting your expectations? Are there bottlenecks that slow things down? Be honest here—this is your chance to fix what’s broken.

3. Set clear goals and KPIs

Define goals and back them up with measurable KPIs. For instance, aim to reduce spending by 10% or add five new diverse suppliers this year. Make sure these goals are realistic and align with other departments like finance and operations.

4. Build a strong supplier base

Find suppliers you can rely on—not just the cheapest ones. Look for partners who align with your values, deliver quality, and can grow with you. Close collaboration leads to long-term partnerships, and a solid supplier base gives you flexibility when markets shift or problems arise.

5. Optimize costs (Without sacrificing quality)

The lowest price isn’t always the best deal. Negotiate contracts to make sure you’re getting the best value while maintaining standards.

Look at the total cost of ownership (TCO) instead of focusing on the upfront costs. It’s about balancing cost, quality, and efficiency.

6. Implement risk management strategies

Things go wrong — it’s inevitable. Whether it’s supply chain delays or unexpected market changes, you need a backup plan that can minimize impact. Maintain relationships with backup suppliers, monitor inventory closely, and include force majeure clauses in contracts to protect yourself.

7. Use strategic sourcing to drive innovation

Procurement isn’t just about saving money—it’s about adding value. Look for suppliers who can bring innovative ideas or technologies that set you apart from the competition. For example, innovative suppliers can introduce products that differentiate your company in the market or bring down production costs without sacrificing quality.

8. Integrate automation and technology

Stop wasting time on manual tasks. Tools like Jotform Workflows can automate approvals, purchase orders, and much more to free up your team for strategic work with online Purchase Approval Forms and Procurement Workflows. AI-powered tools can also help you predict demand and avoid disruptions before they happen.

9. Focus on sustainability

Sustainable procurement isn’t just good for the planet—it’s good for business. Partner with suppliers who prioritize ethical practices and sustainability. It builds your brand’s reputation and meets growing customer demands for responsible practices.

10. Monitor, adjust, and improve

A good procurement strategy isn’t a one-and-done project—it’s a living, breathing plan. Regularly track your progress, review performance data, and make changes as your business grows or market conditions shift. Don’t hesitate to revisit your goals and KPIs quarterly.

Types and components of procurement strategies

No two businesses are the same, so your procurement strategy should match your unique needs. Here are a few common approaches.

Risk management

Identify potential disruptions and prepare contingency plans, like backup suppliers and diverse sourcing locations.

Cost reduction

Go beyond price cuts—improve processes, negotiate smarter, and look at total ownership costs. For example, you can group orders to achieve bulk discounts.

Supplier relationship management

Build strong, long-term relationships with suppliers with regular communication, feedback, and performance evaluations to ensure trust and reliability.

Strategic sourcing

Focus on finding suppliers that align with your company’s long-term goals and values instead of focusing on day-to-day needs.

Supplier diversity

Work with suppliers from diverse backgrounds to promote inclusivity and gain fresh perspectives.

Why a good procurement strategy matters

If you’re wondering why you need a procurement strategy, here’s the short answer: it saves money, reduces risk, and keeps your business competitive. A good procurement strategy ensures you’re spending smart, staying agile, and positioning yourself for long-term success.

Key benefits include

• Cost savings: Smarter negotiations and efficient processes lead to real savings.
• Risk control: Proactively handle supply chain disruptions before they cause problems.
• Competitive advantage: Strategic sourcing gives you an edge in the market.
• Compliance: A solid strategy keeps your procurement process aligned with company policies and ethics.

Matching business goals and requirements

The most effective procurement strategies are the ones that align with your organization’s broader goals.

Defining success metrics

You can’t improve what you don’t measure. Define metrics that align with your procurement goals. For example

• Track supplier delivery times.
• Measure cost per unit across suppliers.
• Survey your teams about procurement process satisfaction.

The importance of automation in procurement

Let’s be real: manual procurement processes are slow, error-prone, and time-consuming. Automation tools can save you from these headaches by handling repetitive tasks, so you can focus on strategy.

Using software tools to automate procurement

Tools like Jotform Workflows allow you to handle purchase approvals and end-to-end workflows, and track procurement tasks in real-time. Jotform Workflows also has multiple templates that can help you create your own procurement flows according to your needs. These flows can include different steps, such as the Purchase Approval Form to be filled out by employees.

Best procurement software

• Jotform Workflows: Automates procurement workflows from vendor approvals to tracking with easy-to-use templates.
• Coupa: Focuses on spend management to keep costs under control.
• SAP Ariba: Connects businesses with a global network of suppliers for smoother collaboration.

Optimize procurement to boost business success

A smart procurement strategy is a game-changer. When done right, it cuts costs, minimizes risks, and helps you stay ahead of the competition. By aligning your strategy with your company’s goals and using tools like Jotform to automate tasks, you’ll turn procurement into a powerful asset.

So, whether you’re building a new strategy from scratch or refining an old one, this guide gives you the roadmap you need to succeed. Start small, track your progress, and keep improving. Before long, your procurement process will be running like a well-oiled machine.

Photo by Mikael Blomkvist