Procurement Management Principles

💡🤷🏽My Procurement Roadmap – Lessons from the Trenches After 25 years in Procurement and Supply Chain, spanning multiple industries and geographies, I’ve been fortunate to work with outstanding people and seize opportunities that shaped both my career and leadership approach. Along the way, I’ve gathered lessons - some strategic, some practical, that continue to guide me today. Here's what I've learned by being in the trenches: Strategic lessons: 1️⃣ Relationships are as important as contracts. 2️⃣ Procurement is a strategic enabler, not just a transactional function. 3️⃣ Change is constant - adaptability is resilience. 4️⃣ Data drives decisions, but people deliver outcomes. 5️⃣ Integrity is non-negotiable. Practical lessons: 1️⃣ Keep it clear - avoid jargon with stakeholders. 2️⃣ 15% of requirements are unique, 85% are routine. 3️⃣ Spend data is your foundation. 4️⃣ Compliance safeguards both you and the business. 5️⃣ Own it end-to-end - accountability matters. 6️⃣ Sit with your stakeholders - decisions move faster. 7️⃣ See what you’re buying - context matters. 8️⃣ Reporting lines are secondary - flex your style. 9️⃣ Beware of “PowerPoint consultants.” 🔟 Procurement isn’t hard - people make it hard. At its core, procurement is about creating clarity, simplifying complexity, and driving tangible outcomes. Simplicity and accountability always win. 👉 I’d love to hear from you, what are the biggest lessons you’ve learned in your procurement career? ⭐️Scars, Lessons, and Triumphs - SLT⭐️

Purchasing vs. Procurement: Are You Effectively Managing Both? In many organizations, the terms "Purchasing" and "Procurement" are often used interchangeably, but they represent distinct functions with different objectives. Understanding the difference is crucial for optimizing cost management, enhancing supplier relationships, and improving overall operational efficiency. Purchasing: Transactional & Operational; Purchasing is a tactical, short-term activity that focuses on acquiring goods and services to meet immediate business needs. It is primarily transactional in nature and centers around the execution of orders: • Managing requisitions and purchase requests • Reviewing and responding to RFQs (Request for Quotation) • Creating and issuing purchase orders • Coordinating the receipt of goods and performing quality checks • Processing payments to suppliers Procurement: Strategic & Value-Driven Procurement, on the other hand, is a strategic function that encompasses a broader, long-term perspective. It aims to maximize value, minimize risks, and align purchasing decisions with the company's strategic goals. Procurement involves: • Identifying and assessing the organization’s long-term business needs • Evaluating, selecting, and managing supplier relationships • Issuing and reviewing RFQs while fostering competitive bidding processes • Negotiating contracts and establishing favorable terms • Managing supplier performance and measuring it through KPIs • Conducting risk assessments and ensuring compliance with legal and regulatory standards • Driving cost savings and value optimization through strategic sourcing • Promoting sustainability and ethical sourcing practices across the supply chain Key Takeaway: While purchasing is vital for fulfilling immediate requirements, procurement is the engine that drives long-term organizational success. A well-structured procurement strategy goes beyond the transaction—it builds partnerships, mitigates risks, and ensures that the company can secure the best value over time. Effective procurement not only ensures cost efficiency but also supports the company’s goals of sustainability, innovation, and growth.

9 laws of Procurement: These are 9 of my favourite laws and principles, and how they can be applied to Procurement. 1) The Eisenhower Principle: The Urgent/Important Principle - "What's urgent isn't important and what's important isn't urgent" Being aware of this can help effectively prioritise more strategic activities. Next time someone says something is urgent - think: "is this important... really?" 2) The Pareto Principle (80/20 Rule): "80% of effects come from 20% of causes" For example, most of a company's spending is with a small group of suppliers. Procurement should focus on managing these key relationships for the most significant impact. 3) Parkinson's Law "Work expands to fill the time available for its completion" If we set six months for a tender process, it will take at least six months. Why not try six weeks or six days? Work backwards from the steps you absolutely must take. 4) Murphy's Law: "Anything that can go wrong, will go wrong" In Procurement the need for risk management, planning for contingencies, and having backup suppliers is vital. When negotiating, always think "What if...?" 5) Hofstadter's Law: "It always takes longer than you expect, even when you take into account Hofstadter's Law" With so many variables and external factors Procurement project planning is especially difficult. Allow time to do a thorough job, and then remember this Law... 6) Kanter's Law: "Everything can look like a failure in the middle" Procurement projects can start off well, but soon become difficult. Agree objectives and keep coming back to what you want to achieve. The right outcome is vital - the process is one of learning and growth. 7) Twyman's Law: "Any figure that looks interesting or different is usually wrong" Data outliers or surprising results should be treated with caution. If a supplier's price is significantly lower than others, it may indicate a misunderstanding of requirements, a mistake, or a riskier proposition. 8) Goodhart's Law: "When a measure becomes a target, it ceases to be a good measure" When cost savings become a sole focus, it can lead to behaviours that are detrimental in the long term. Don't compromise on quality, service, or supplier relationships to hit team targets. 9) Law of Diminishing Returns: "Benefits gained from something will represent a proportionally smaller gain as more energy is invested in it" In procurement, excessive focus on cost reduction or over-negotiation with a supplier might yield fewer benefits over time. Which is your favourite law and are there any you would add? #procurement #laws #procurementleaders

The 10 commandments for procurement success in 2024 and beyond: I've seen businesses crumble due to poor procurement strategies. The key to thriving isn't volume—it's value. Here’s a game plan that transformed my procurement process: 1. **Know Your Market**: Research to avoid costly mistakes. 2. **Set Clear Goals**: Efficiency and value start here. 3. **Build Strong Relationships**: Trustworthy supplier partners equal smooth operations. 4. **Embrace Technology**: Automate to save time and reduce errors. 5. **Negotiate Wisely**: Cut costs without cutting corners. 6. **Monitor Compliance**: Ensure adherence to regulations. 7. **Focus on Sustainability**: Long-term gains from eco-friendly choices. 8. **Risk Management**: Prepare for the unexpected. 9. **Continuous Improvement**: Learn, adapt, and grow. 10. **Integrity First**: Ethical practices build trust and reputation. These commandments prevent waste, fraud, and inefficiency. Try this today: review your supplier list and assess value versus cost. You'll see improved performance and a stronger bottom line. Embrace these principles. Your procurement process will thrive.

Procurement in Project Management — Simplified Procurement begins when you decide to buy something from outside instead of making it in-house. This comes from the make-or-buy decision. Once you choose to buy, here’s how the process works: ⸻ 1. Procurement Planning • Procurement Statement of Work (SOW): Defines exactly what you need, how much is required, when it’s needed, and from whom (qualified vendors). • Procurement Strategy: Explains how procurement will happen — methods, delivery, and responsibilities. • Procurement Management Plan: Documents the overall process for managing procurement. At this stage, you also decide the type of contract you’ll use. ⸻ 2. Contract Types The type of contract depends on how clearly the scope is defined: • Firm Fixed Price (FFP): Scope is 100% clear; everything is fixed. • Fixed Price Incentive Fee (FPIF): Encourages vendors to finish earlier or perform better. • Fixed Price with Economic Price Adjustment (FP-EPA): Used in long-term contracts to adjust for inflation or changing costs. • Time & Material (T&M): Flexible, used for rentals, subscriptions, or ongoing services (think Uber or Netflix). • Cost Plus Fixed Fee (CPFF): Scope isn’t fully clear. Example: mechanic or AC technician troubleshooting issues step by step. • Cost Plus Incentive Fee (CPIF): Seller earns extra if they work efficiently or deliver faster. • Cost Plus Award Fee (CPAF): Awarded when the seller does an exceptional job. ⸻ 3. Conducting Procurement • Bidder Conference: Vendors meet to understand requirements and ask questions. • Proposal Submission: Vendors provide their offers. • Negotiations: Project Manager negotiates on scope, quality, schedule, and risk. Money negotiations are handled by the Procurement Manager. • Contract Signing: Once signed, the contract governs the relationship. ⸻ 4. Administering Procurement • Work is performed according to the contract. • Deliverables are inspected. • If accepted, procurement is closed. • If rejected, conflict resolution begins. ⸻ 5. Conflict Resolution Disagreements can happen. Here’s the escalation path: 1. Mutual Agreement (Win-Win). 2. Refer to the Contract. Follow what’s written. 3. Mediation. Involve a neutral third party. 4. Litigation (Court). Last resort — costly, slow, and best avoided. ⸻ ✅ That’s the entire procurement cycle: from deciding to buy → planning → contracts → execution → conflict resolution. Clear, structured, and practical.

𝟲 𝘀𝗶𝗺𝗽𝗹𝗲 𝗽𝗿𝗶𝗻𝗰𝗶𝗽𝗹𝗲𝘀 𝗳𝗼𝗿 𝗚𝗼𝗼𝗱 𝗣𝗿𝗼𝗰𝗲𝘀𝘀 𝗤𝘂𝗮𝗹𝗶𝘁𝘆 𝗶𝗻 𝗣𝗿𝗼𝗰𝘂𝗿𝗲𝗺𝗲𝗻𝘁 Achieving good process quality remains a challenge for many organisations, especially in Procurement. Yet it's the foundation of operational excellence and the ability to drive consistent, scalable results It’s not just about designing the right processes. That's only the beginning. The key is to build an efficient management cycle that elevates process quality and performance while supporting adaptability to achieve your goals. Find here 6 principles to get this right: 1️⃣ 𝗗𝗼𝗰𝘂𝗺𝗲𝗻𝘁 𝘄𝗵𝗮𝘁 𝘆𝗼𝘂 𝗱𝗼 Clearly define and document all processes, aligning them with the organisation’s purpose and goals to maintain clarity and consistency. Use interviews & process Intelligence tools to discover the best route amidst variations. 2️⃣ 𝗗𝗼 𝘄𝗵𝗮𝘁 𝘆𝗼𝘂 𝗱𝗼𝗰𝘂𝗺𝗲𝗻𝘁: Train people to consistently execute documented processes, making sure each step is purpose-driven and aligned with organisational objectives. Adoption is key! 3️⃣ 𝗩𝗲𝗿𝗶𝗳𝘆 𝘄𝗵𝗮𝘁 𝘆𝗼𝘂'𝗿𝗲 𝗱𝗼𝗶𝗻𝗴 Regularly assess and measure process performance through audits, tracking key metrics, and ensuring alignment with the intended goals. Controlling is better than assuming when it comes to process conformance & quality. 4️⃣ 𝗜𝗺𝗽𝗿𝗼𝘃𝗲 𝘄𝗵𝗮𝘁 𝘆𝗼𝘂'𝗿𝗲 𝗱𝗼𝗶𝗻𝗴 Continuously refine and adapt processes based on feedback, evolving goals, and external changes, ensuring they remain efficient and aligned. There is no such thing as static, isolated processes over prolonged time. 5️⃣ 𝗔𝘂𝘁𝗼𝗺𝗮𝘁𝗲 𝘄𝗵𝗲𝗿𝗲 𝗽𝗼𝘀𝘀𝗶𝗯𝗹𝗲 Use automation tools to further streamline improved processes and repetitive tasks, reduce manual errors, and improve efficiency, allowing teams to focus on strategic efforts. 6️⃣ 𝗖𝗼𝗺𝗺𝘂𝗻𝗶𝗰𝗮𝘁𝗲 𝗮𝗻𝗱 𝗰𝗼𝗹𝗹𝗮𝗯𝗼𝗿𝗮𝘁𝗲 Establish transparent communication channels and collaboration across teams to ensure everyone is aligned with the new processes and changes while working toward shared goals. While the buzz in Procurement has shifted to the technology side, 𝗴𝗼𝗼𝗱 𝗽𝗿𝗼𝗰𝗲𝘀𝘀 𝗾𝘂𝗮𝗹𝗶𝘁𝘆 𝗺𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝗱𝗼𝗲𝘀 𝗻𝗼𝘁 𝗮𝗴𝗲. 𝗜𝘁 𝗼𝗻𝗹𝘆 𝗯𝗲𝗰𝗼𝗺𝗲𝘀 𝗺𝗼𝗿𝗲 𝗲𝘀𝘀𝗲𝗻𝘁𝗶𝗮𝗹, providing the foundation for technology to thrive and for Procurement to achieve the results committed. ❓What steps are you taking to improve your process quality ❓Any other principle you would add #processmanagement #procurement #bpm #quality #automation ♻️Found the post useful? Follow me and share this post with your network.

After my first formal Procurement category management training, I knew this was my jam. In our framework series, today we cover the strategic backbone of Procurement - Category Management. 💡What is it? Also known as the 5-step, 6-step, or 7-step strategic sourcing framework, it is a structured way to organize Procurement resources to focus on specific spend areas to meet overall business goals. Categories are segmented based on certain criteria, and each group is managed as a business unit under its own CEO - the Procurement category manager. 💡How do we use it? Basic steps to CM are - 0️⃣ Category identification Classifying goods/services procured into distinct categories based on their function, or their importance to the business. For ex., Professional services spend is a category based on function, while Sugar for a candy manufacturer would be a Strategic category based on its importance. Also, we figure out what is the right category management approach - is this a category with heavy day-to-day stakeholder involvement? If so, you’ll want to include them in each step. 1️⃣ Business needs identification Understand what the business needs from the category - high margin, uninterrupted supply, etc.? Understand changing priorities as well. When I managed agri-commodities for a retailer, for many years cost management was not a priority because industry norm was to pass on cost increases to the customer. The tide shifted once private label growth boomed, making cost a priority. 2️⃣ Situation analysis I love diving into the market dynamics of a category. This step is about learning everything about the category, especially its value chain, demand-supply dynamics, cost drivers, and supplier landscape. Btw, if you hear from me enquiring about your expertise in a supply market, know that I will 100% repay the favor. 3️⃣ Category strategy creation Once you learn about your category dynamics, you decide how to deliver your objectives. For ex., cost reduction through vendor consolidation may be an effective approach for tail spend categories. 4️⃣ Strategy implementation Leverage your broader team as needed to obtain approval and to implement your strategy. 5️⃣ Continuous improvement Strategies must be dynamic and evolve with the environment. This is the step where we make changes as needed. 💡Why do I like this? - Category management has the potential to elevate transactional procurement teams to strategic visionaries - We build focused expertise within orgs with SMEs, which in turn deliver long term cost efficiency and risk mitigation 💡What are the cons? - The category management approach is resource intensive - Some cats can be extremely complex with conflicting business needs - Gaining alignment is the key to good category management and requires time and relationships. 🔔 Hit the bell to follow the rest of my Procurement framework series. This is framework #6 of 9.

Procurement Policy Guidelines: A well-structured procurement guideline is essential for transparent, efficient and compliant procurement. It defines clear rules for external expenditure, describes responsibilities and processes and serves as a guide for everyone involved in the procurement process. The content of a procurement guideline can vary from company to company but includes key elements such as the aim and purpose of the guideline, tasks, responsibilities and accountabilities, methods for selecting suppliers, ethical standards, value limits and sustainability criteria. Documentation, contract management, communication and compliance are also fundamental components. A clear process should be followed when creating or developing a procurement guideline. A defined authorised person from the procurement management team takes control and ensures that roles and responsibilities are precisely defined. The entire procurement process - from determining requirements to invoice payment - must be considered. Training and clear instructions help to embed the policy in the company and apply it in practice. To formulate an effective procurement guideline, three essential steps are required: (1) define goals and needs, (2) create and evaluate an initial version and (3) coordinate with key stakeholders from finance, legal, production and management. This coordination ensures that the policy is workable and meets company requirements. The best method for an effective procurement guideline includes a clear structure that is easy to understand through headings and bullet points. The content should be concise and written in simple language, avoiding jargon and complicated terms. Definitions, examples and visual aids such as tables or diagrams make it easier to understand. In addition, cross-references to supplementary documents, guidelines or templates help to integrate the purchasing process seamlessly into the company structure. By regularly reviewing and adapting to new requirements, the procurement guideline remains an effective tool for strategic and sustainable procurement. Do you have a procurement policy? What have you defined? Dr. Mario Büsch, PURCHNET.de

Great procurement isn't about price; it's about partnership and purpose. Too often, procurement is misunderstood as simply the act of negotiating the lowest cost. But the organizations that thrive understand a deeper truth: procurement is a driver of resilience, trust, and long-term value. -- When procurement focuses only on price, relationships remain transactional. -- When procurement focuses on partnership, it builds collaboration, transparency, and innovation. -- When procurement aligns with purpose, it ensures sustainable sourcing, ethical practices, and shared growth. I have seen suppliers transform from vendors into strategic allies when trust and shared purpose were placed at the center of the relationship. The results? -- Reduced risks -- Greater innovation -- More sustainable outcomes -- Stronger resilience during disruptions Procurement leaders must therefore ask themselves: -- Are we negotiating for short-term savings, or are we investing in long-term partnerships? -- Are we treating suppliers as replaceable, or as critical contributors to our success? Because at the end of the day, procurement is not just about contracts and costs. It is about enabling organizations to achieve their vision with integrity, collaboration, and shared value. Price may win the deal. Partnership and purpose build the future. LinkedIn Linkedin News #Procurement #SustainableProcurement #Leadership #SupplierManagement #BusinessExcellence

In procurement, getting the basics right isn’t optional—it’s essential for driving results. The ABCs of Procurement lay out the foundation every professional needs to succeed in this dynamic field. From analyzing data to building trust with suppliers, this framework captures what it takes to elevate procurement from a transactional function to a strategic powerhouse. 📌 Here’s the big picture: 
1️⃣ Master the numbers: Data-driven decision-making is non-negotiable. Analyze (A), track Metrics (M), and always Justify (J) your strategies with solid evidence. What gets measured gets managed.
 2️⃣ Strengthen relationships: Procurement is about people as much as processes. Collaborate (C), treat Partnerships (P) as allies, and prioritize Relationships (R) for long-term success. Strong connections are your competitive advantage.
 3️⃣ Stay ahead of the curve: The best procurement strategies are forward-looking. Invest in Innovation (I), prioritize Sustainability (S), and continuously Upskill (U) your team to stay competitive in a fast-changing world.
 4️⃣ Deliver value at every step: Efficiency (E), Optimization (O), and Zero Waste (Z) ensure you maximize ROI while minimizing waste. Every deal and every decision should create impact, not just savings. Procurement isn’t just about cutting costs—it’s about creating strategic value, building resilience, and ensuring long-term growth. 📢 Which part of the ABCs resonates the most with your current approach to procurement? Let’s hear your thoughts in the comments! Hope you liked this post! Repost 🔁 to share with your network. My name is Marijn Overvest, I'm the founder of Procurement Tactics – we train procurement teams with online courses.