Everything You Need to Know About Procurement Consultants, Procurement Strategy and Procurement Services
Having a streamlined procurement process and a clear procurement strategy is essential to ensure your organization is able to meet its business goals, ranging from profitability to sustainability and more.
At Proxima, we’re experts in helping our clients spend their money wisely. That’s why some of the world’s leading businesses trust us to deliver quality procurement services that enable optimum business performance. To read more about our services, please click to home page. For a more general overview of procurement, please read on.
In this guide, we outline the benefits of using a procurement consultant to help you achieve your business goals, as well as everything you need to know about procurement strategy, procurement services and more.
Read on to explore:
- The definition of procurement
- What can a procurement consultant offer?
- What is the purpose of a procurement strategy?
- What are the different procurement types?
- Sourcing a procurement consulting firm
- How can Proxima’s procurement services help you?
The definition of procurement
According to the Cambridge Dictionary, procurement is ‘the process by which an organization buys the products or services it needs from other organizations’. However, for us at Proxima, this doesn’t quite encompass everything procurement is or the impact it can have on businesses.
Procurement can help an organization achieve its business goals by buying goods and services in a profitable and ethical way. The ways to achieve this range from cost optimization, reviewing suppliers following mergers and acquisitions, implementing and accelerating digital transformation, building reliant supply chains to the transformation of internal procurement functions and so much more.
To deliver the best possible service, a modern procurement consultant needs to establish a clear procurement strategy, process and plan in order to continue driving their function forward.
What can a procurement consultant offer?
Employing a talented procurement consultant is vital to achieving business success and remaining profitable. Provided their procurement strategy is aligned to your organizational goals, you can expect to:
- Win market share
- Stay at a steady target liquidity level
- Adjust and evolve to meet new customer, economic, societal, and operational norms
- Reduce your external supplier spend
- Remain profitable
- Improve supplier relationships
- Simplify your supply chain
- Receive a digital roadmap for better commercial, operational and risk data
- Experience operational improvements
- Reduce stress levels
What is the purpose of a procurement strategy?
A procurement strategy is a roadmap or a long-term procurement plan that details how your organization will acquire and deliver essential products and services.
A robust procurement strategy should not only consider your company’s wider objectives, the organization’s timeline and budget, but take into account additional procurement process costs or associated risks that may be present.
Your organization’s procurement strategy should seek to achieve reduced costs, increased operational efficiency, and positively contribute towards achieving business growth.
While specific procurement goals will vary from business to business, the objectives above are beneficial to all types of businesses and are therefore a great place to start.
What are the different procurement types?
Procurement can either be direct (raw materials and production goods) or indirect (maintenance, repair, operating supplies and outsourcing) and covers a wide range of sectors — from retail procurement to hospitality procurement and much more.
However, procurement services can also be split into several different types, as follows:
Indirect procurement or Goods not for Resale (GNFR) is procurement focused on critical things for making an organization work, but do not go into a final product. In this instance, the procurement consultant may be buying goods or services in categories like Marketing, IT, Consulting, Facilities, or other things that make an organization tick. The procurement of indirect goods and services is often complex; there are many buyers in an organization and many suppliers meaning that the procurement consultant needs to build strong buy and sell-side relationships. The procurement consultant rarely holds the budget. Instead, they act on behalf of a budget holder and decision-maker.
Direct procurement, often also referred to as COGS (cost of goods sold), of GFR (Goods for Resale), is focused on things that make it into the final product bought by a customer. In this instance, a procurement consultant may be focussed on raw materials, ingredients, or commodities, all of which need to be tied into the bill of materials and production cycles. As distinct from Indirect Procurement, in Direct Procurement, there are often fewer sources of supply and fewer buyers. In many cases, the procurement consultant or manager will own the budget and make the decisions.
Supply Chain Consulting focuses on the logistics and fulfillment that sits behind an organization’s ability to receive and deliver goods through the supply chain or to the end customer. People who work in this space are often not referred to as procurement consultants; moreover, they are referred to as supply chain specialists reflecting the defined skills required and distinct location within an organization. While many of the supply chain consultancy goals are similar to procurement consultancy, the specific knowledge required often sets it aside as a distinct discipline.
As a procurement consultant, you will hear about many different types of procurement; essentially, these are approaches. There are many different techniques are a procurement consultant can use depending on factors like quality, availability, risk, price, etc. Some of these approaches (but not all) are:
Is typical to a low value, or easy to find good and services and involves typically getting three or more fast quotes against a given specification.
Is a highly diligent sourcing approach to thoroughly test the market and select a partner for significant, high value, or high-risk projects.
Fills the gap in between spot buy and strategic sourcing.
Online tools, enabling the procurement consultant to run the above processes, with auctions often being a dedicated session where suppliers can bid against each other.
Framework/ Preferred Supplier List/ Panel
In this instance, the procurement consultant will create and qualify a supplier list that an organization should work with. This may be 2-3 players or in cases like government may include tens of procurement consultancy’s (for example) for can all subsequently bid for work.
Single procurement in business occurs when a customer orders a particular product, prompting suppliers to produce and ship that item.
Stock procurement means goods are periodically shipped according to an agreed schedule, i.e. not triggered by a single customer order.
Vendor Managed Inventory (VMI)
VMI means the supplier controls its customer’s stock levels. This crucially requires you to have a close and trusting relationship with your chosen supplier.
Just-In-Time (JIT) procurement
JIT procurement means keeping stock levels low to keep inventory volumes down and in turn, storage costs. This relies on a highly coordinated logistics process, with delivery centers strategically positioned nearby customers.
Just-In-Sequence (JIS) procurement
JIS procurement is similar to the JIT concept, except goods supply is even more strategically calculated at defined times, resulting in further efficiency gains.
Sourcing a procurement consulting firm
When sourcing a procurement consultant or a procurement consulting firm, there are several factors you need to consider to ensure your business makes the right choice.
Key considerations to make include:
- Determining whether the consultant or firm is independent (and therefore unbiased when it comes to recommending specific solutions)
- Ensuring the consultant or firm has the right credentials and/or experience to evidence their expertise claims
- Asking for examples of previous work (and ideally, examples of when they’ve worked with organizations of a similar size and sector)
- Meeting with the consultant or firm to ensure your objectives are aligned
- Researching their chosen methodology to ensure it meets your needs
- Asking what information they need you to provide in advance to prevent delays or surprises
At Proxima, we understand that choosing a procurement consulting firm is a significant decision for any organization. That’s why we work hard to understand your business’ needs, backed up by our 25+ years of experience helping the world’s leading brands optimize their procurement process and achieve their goals.
Talk with one of
our procurement consultants
We would welcome the opportunity to understand what your goals are and how we can help. We have a number of examples of how we’ve worked with businesses from all industries in the past and can share some of the benefits they derived.
Please complete the short form and we will get one of the procurement team to contact you.