As we head into the final third of this year, heads of corporate functions are thinking about the next one.
September and October typically see senior procurement managers start to look at this year’s performance and work out how they will improve in the next 12 months, and how they might expand the function’s role and pursue bolder projects.
These five stages should help procurement teams get the most from their planning process this year.
Identify lessons from the past 12 months: Start by documenting lessons you’ve learned over the past year and the key objectives that you’d like to continue concentrating on through the next 12 months.
You’ll need the previous year’s strategy and plan, functional dashboards, and corporate-level information on business needs to help you do this. Review the results to date, talking through key successes and failures, along with their root causes.
One common mistake made by procurement teams is to simply continue with a modified version of the previous year’s plan. Instead, make sure you’re putting business results (saving money or making money) first, which may mean taking a different path than the one originally intended.
Think about internal and external risks and opportunities: Look at the biggest challenges and the biggest opportunities for both the firm and the procurement function. For this step, bring external and internal data to the table, including details of industry trends, news stories, or opinions from external consultants, as well as the corporate strategy, mission, and vision.
Activities to carry out during this phase include evaluating industry trends, scenario planning, and recording business partners’ strategic priorities. This last task can help you avoid the pitfall of concentrating only on traditional procurement tasks (like negotiating and securing supply agreements) at the expense of the other ways Procurement can help (like innovating with suppliers or exploring collaborative cost-cutting ideas).
Upon completing this stage, you should have a preliminary list of strategic priorities and alternatives, as well as a set of assumptions on Procurement’s strengths and weaknesses and external trends, such as supplier safety or quality issues in the news.
Establish priorities: Next, use your initial list of strategic priorities from the previous stage to choose a core set of strategic initiatives and alternatives, using details from last year’s projects, your internal and external analysis, and your business partners’ strategic plans.
Work with internal partners and teams to develop targets and goals based on your strategic priorities, evaluating the risks and opportunities of initiatives you’re considering.
After this stage, you should have a prioritized list of strategic initiatives for the coming year, along with a business case supporting them.
Communicate to business partners: Your next task is to build buy-in for your strategic plan and identify opportunities to work together with business partners to achieve it.
You’ll need to develop messages that link Procurement’s strategic priorities with the goals of internal customers, and then communicate these priorities to them. Always demonstrate how your strategic priorities will benefit the enterprise as a whole.
Set your budget and structure: The final step is to set up a budget, organizational structure, and execution plan to turn strategy into action.
Once the organizational structure is in place, allocate resources across activities. Then, communicate priorities to your teams. The final output should be a trackable budget, team assignments, and clear objectives for your staff. Make sure to build flexibility into your plans so you can adjust should needs change.