Procurement Strategy: By: Reden Delos Santos Mojica Jen Marjorie F. Nicolas Wesley Rabe Jetro Torres

CHAPTER 3:
PROCUREMENT
STRATEGY
(IE-5105)
by:
Reden Delos Santos Mojica
Jen Marjorie F. Nicolas
Wesley Rabe
Jetro Torres
CONTENTS
1 ANALYZING THE SUPPLY 2 Spend Analysis vs. Spend

CHAIN MARKET Management
SUPPLY POSITIONING
3 MODEL 4 E- PROCUREMENT
PROCUREMENT
STRATEGY
Procurement strategies
often focus on options
like reducing costs,
Procurement, by mitigating risks, and
definition, is the expanding organically.
acquisition of the
materials, supplies, Procurement strategy
services that a depends on a number

of factors like purchase
company or project timeline, the available
requires in order to
budget, the total cost
of ownership (TCO),
successfully possible risks, and

more.
operate.
Types of procurement strategies
• Cost reduction
• Risk management
• Supplier management and optimization
• Green purchasing
• Global sourcing
• Total quality management
Steps to create an effective procurement strategy
• Develop a digital
• Analyze • Define Procurement
• Assess market procurement strategy
organizational Policies
conditions • Outline a procurement
spend • Implement
• Set clear strategy
• Determine procurement • Execute, manage, and
business needs
objectives
software refine the strategy
Procurement strategy framework
Strategy statement: the basis and rationale
Desired results: deliverables
Timeframe: deadlines
Tactical plan: how a strategy will be implemented
Measures: metrics used to evaluate the process
Tools used: TCO, SWOT analysis, Porter’s Five Forces,
Category Positioning Matrix, SCOPE Analysis, Fishbone
Analysis, etc.
1 ANALYZING THE
SUPPLY CHAIN
MARKET
• What is a Supply Chain?
The network of external suppliers,
internal processes, and external
distributors, and the links connecting
them, that deliver a finished product
or service to the customer.
A Basic Supply Chain Market
Supply Chain Management entails:
•Making decisions regarding the
structure of the supply chain
•Coordinating the movement of goods
and delivery of services
•Sharing information between members
of the supply chain.
SCM Factors
SCM must consider the following trends, improved capabilities, &
realities:
Consumer Expectations and Competition – power has shifted to the
consumer
Globalization – capitalize on emerging markets
Information Technology – e-commerce, Internet, EDI, scanning data,
intranets
Government Regulations - like trade barriers
Environment Issues – e.g. waste minimization
Components of a
Typical Supply Chain
External Internal External

Suppliers Functions Distributors
INFORMATION
Information Flow in Supply Chains
2 Spend Analysis vs.
Spend Management
What is Spend Analysis?
• Spend analysis is the practice of reviewing procurement
spend data to decrease costs, increase efficiency or improve
supplier relationships.
• Spend analytics is one of the key tools that procurement

organizations use to proactively identify savings
opportunities, manage risks and optimize the organization’s
buying power.
What is Spend Management?
• Spend management presents a holistic view of the
activities involved in the “procureto-pay” process. This
process includes, for example, sourcing, purchasing,
goods receiving, payment settlement, and management of
accounts payable and general ledger accounts. In short,
spend management is the way in which organisations
control their spending.
Spend Analysis is what you
do to the data…
Spend Management is what you

do with the data.
Accounts Payable SPEND ANALYSIS
Spend
Spend data that

you trust and
Cleans that contains as
e
much detail as
Classi
fy
possible
Enrich
SPEND MANAGEMENT
Manage
Deliver Improve
Maverick
Savings Processes
Spend
Manage Recover
Supplier Manage Risk Over-
Relationship payments
Spend
Spend
Data Procure Co- Reduce Source More
Data operatively Disparity Locally
Benchmark
Ensure Legal Quantify
Relative
Compliance Savings
Position
WHO SHOULD USE THE DATA?
• Procurement Directors
• Contract Managers
• Buyers
• Business Officers/Vice Presidents
• Finance Directors
• Accounts Payable
• Audit/Legal Departments
• Economic Development
• Diversity Officers
• Sustainability Officers
WHO SHOULD USE THE DATA?
Department heads, budget holders and anyone who spends the

organization’s money.
SPEND ANALYSIS
Spend Analysis Benefits
How to do Spend Analysis
Direct vs. Indirect Procurement Spend
DIRECT INDIRECT
In procurement refers In procurement is the sourcing of

to goods and services goods and services not directly
related to manufacturing of
that are directly related
products. Indirect procurement
to making products. enables businesses to maintain
and develop its operations.
Best Practices in Spend Analysis
• Classify spend data at a detailed level and adopt a common classification
schema in the company.
• Pursue a permanent solution versus one-time efforts.
• Have an automated approach to cleansing and classification.
• Access all spend-data sources within and outside the organization.
• Continuously improve and expand scope of spend data management program.
• Collaborate with IT and other key stakeholders like finance in the whole
process.
• Define category strategies and measure impact.
• Take actions based on data insights to deliver savings opportunities/ savings
program management.
3 SUPPLY POSITIONING
MODEL
4 e-Procurement
e- procurement
System of procuring goods and

services online using the
internet/ computer system
An electronicint integration and

management of all procurement It covers the full life cycle of
activities procurement
• purchase request
• ordering
• delivering and payment
Types of e- Procurement
e-market site WEB-BASED ERP e- informing
e- MRO e- Tendering e- reverse

auctioning
ADVANTAGE DISADVANTAGE
-TIME SAVING
- TRANSACTION COST
-COST SAVING
-TIME AND RESOURCES
-ACCURACY
CONSUMING
- REAL TIME
- BUDGET AND POLICY OF
- MOBILITY
ORGANIZATION
-TRACKABILITY
-INFRASTRUCTURE
-MANAGEMENT
-BENEFITS TO SUPPLIERS
THANK YOU!

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CHAPTER 3:

1 ANALYZING THE SUPPLY 2 Spend Analysis vs. Spend

definition, is the expanding organically.

services that a depends on a number

company or project timeline, the available

successfully possible risks, and

External Internal External

• Spend analytics is one of the key tools that procurement

Spend Management is what you

Spend data that

Department heads, budget holders and anyone who spends the

In procurement refers In procurement is the sourcing of

System of procuring goods and

An electronicint integration and

e-market site WEB-BASED ERP e- informing

e- MRO e- Tendering e- reverse

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