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Setting a strategic plan, whether that be on an annual, three- or five-year basis, is an essential exercise for procurement teams. But procurement executives cannot develop these plans on an ad-hoc basis – they must dedicate a lot of time and thought to their strategies.
CPOs must consider when they will develop their plans, the areas they focus on, what other functions and the organisation want to achieve, as well as how often those plans will be reviewed once finalised.
However, many within the function have long viewed strategic plans as an inconvenience. Indeed, according to Procurement Leaders’ CPO planning guide 2018, 41% of procurement executives surveyed last year said they considered developing a strategic plan to be an optional part of their jobs.
If function wants to become more strategic and embed itself in the heart of the business, it must set a strategic plan and stick to it. How do procurement chiefs accomplish that? you do that?
While 41% of procurement professionals believed strategic plans to be an optional part of their job, a further 7% said their planning activities are largely ignored by the businesses for which they work.
Most of these respondents said they believe parts of their plans have some relevance and these can simply be cherry-picked as and when required.
If annual plans are to be effective – and for procurement to be relevant – its strategic plans must inform every aspect of the function’s work. As such, procurement chiefs must absorb inputs from internal and external stakeholders and ensure the function’s output is broad.
Around one-third (31%) of procurement executives surveyed by Procurement Leaders in 2017 said they update their plans on a quarterly or biannual basis.
Within this, however, there are some nuances. UK businesses tend to close their fiscal years in March, for example, while national law dictates Australian organisations hold their year-end in June.
As such, many CPOs establish and review their plans around these dates. Within the first quarter, Procurement Leaders’ CPO planning guide 2018 found a marked increase in external reviews looking at risk and scenario planning. During this period, companies tend to be more outward-looking and more willing to model possible futures that may affect future sourcing. The next spike of activity, according to the research, comes during Q3. At this time, organisations become more inward-focused. Procurement professionals tend to gauge forecasts within the company and look to budget for the year ahead.
Around one-fifth of CPOs said they update their strategic plans on a quarterly basis while a further 13% said this occurs biannually. Such regular catch-ups formalise the sourcing process and ensure buyers’ day-to-day activities adhere to the function’s overall plan.
The key for procurement chiefs is to know how their plans fit into the overarching plans of the businesses they serve.
More than three-quarters (79%) of procurement executives believed stakeholder requirements to be a key input into their strategic plans, according to Procurement Leaders’ CPO planning guide 2018.
It is important for the function to consult as broad a base of strakeholders as possible when formulating a strategic plan. Stakeholder requirements must be the bedrock of all procurement activities but these must be appropriately matched to supplier capabilities for critical categories.
The art of planning requires CPOs to marry internal pressures (business unit demands, procurement talent levels, and so on) with external changes. Here, market intelligence skills are critical, as many industries face disruptive forces that may drastically alter the nature of the marketplace.
Take part in Procurement Leaders’ annual CPO planning survey to gain exclusive insights into the trends that will shape the function, how procurement chiefs will invest their resources, as well as the roles they intend to hire for and the technologies they think will disrupt procurement. The findings will be published in Procurement Leaders’ CPO planning guide 2019, which will be shared with respondents and Procurement Leaders members in October.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.