Procurement Strategies: Types & Process | Amazon Business

A Definitive Guide to Procurement Strategies: Types, Process & Examples

Discover winning procurement & purchasing strategies for your business on Amazon Business. Explore all types of strategies for informed & successful buying.

Procurement is unavoidable and crucial regardless of the kind of business you operate. Your business cost, risk element, future goals, financial planning, and sustainability feel the after-effects of the procurement strategies in place. Therefore, thinking hard about procurement and sourcing strategies and which negotiation strategies in procurement to stand by becomes crucial for business operation and sustenance.


We understand choosing the ideal strategy for procurement would be extremely difficult. We are presenting this blog to help you choose and better understand the significance of purchasing strategies and how to pick them. For any business owners, entrepreneurs, startups, or someone aspiring to start any business, this blog would help build a strong understanding of how planned procurement can benefit your business.


What is a Procurement Strategy?

Let’s start from the very beginning and absorb the term procurement strategy. It refers to the extensive plan created by a company or organization to source goods, attain services, and other work from external sources. The strategies elaborate the approach taken in the procurement process, enabling cost saving, quality improvements, risk mitigation and supplier relationships. Planning cost saving strategy encompasses crucial steps like need assessment, sourcing strategy, market analysis, supplier selection, contract and risk management.


Why Does a Business Require Strategy for Purchasing?

Whether you are new in business or a player in your industry, you cannot survive without procurement strategies. Regardless of the size and scale at which your business operates, you need external goods and services to run your own. That’s why conceptualizing actionable procurement or sourcing strategies is as crucial as business objectives.


Benefits of a Well-planned Strategy

A carefully crafted purchasing strategy can benefit your business in the following manner:

procurement strategy

Improves Efficiency

Cost-efficient sourcing and procurement strategy ensures the whole procurement process is streamlined with the business goals, enabling efficiency and effectiveness. By outsourcing services or goods at the right time, you can improve the overall company’s health, boost employee morale, upgrade infrastructure and more directly impacting the efficiency.


Saves Money

The negotiation strategies in the procurement of services or goods decide the savings in business transactions. With the right plan, you could save more while ordering in bulk, finding the right supplier, or sourcing the ideal good. For instance, if you purchase goods from Amazon Business, we offer heavy discounts on bulk purchase, business exclusive deals, and business events like Business Value Days, Stock Up Sale, Prime Day Sale, etc.


Risk Management

Keeping a close tab on supplier’s efficiency and market trends to switch and upgrade when needed to avoid risk is also a crucial aspect while devising a procurement plan. If a supplier sends bad inventory or fails at the service end, to avoid future risks, a new supplier comes into the picture. Therefore, sourcing, purchasing, and negotiating strategies come together to soften the impact of market fluctuations, technological advancements, quality, or supplier behavior to mitigate risk.


Build Better Supplier Relationship

Finding the right supplier who is reliable with quality products, vast inventory and quality service is difficult. When you have been in business for a long time, you build relationships with a few suppliers, checking these boxes. Therefore you can build lasting relationships with suppliers offering wholesale discounts and negotiable contracts, ensuring the quality of their service and improving reliability.


Ensure Sustainability

It’s not just about striking the right deal with the supplier, you can also add the element of sustainability to it. Nowadays, incorporating sustainability has become a duty rather than a choice in business transactions. You can ensure sustainability by aligning your purchasing to improve the brand’s reputation, reduce environmental impact, and enable clean technology. If you are in the women’s beauty business you could opt for beauty & make up products promoting clean beauty.


Enables Decision-making

Procurement also impacts business decision-making in many ways. From need assessment, contract negotiation, vendor selection, sourcing, performance assessment, and risk mitigation, decision-making is embedded in every turn of the process. Say you want to tweak the process of procurement to improve supply chain management, you can enhance automation, get live inventory updates, and eliminate unwanted and repetitive processes to improve the overall efficiency of the supply chain.


Compliance and Governance

Procurement strategies are also crucial in ensuring compliance. It ensures the company stays compliant with the legal and regulatory laws associated with the process, like anti-corruption, environmental regulations, and trade laws. Additionally, the purchasing strategies should also comply with the internal organizational policies and standards to maintain uniformity and order.


Strategic Alliance

Your sourcing strategies or procurement plan should also align with all the other organizational policies to collectively achieve the business objectives and future goals. Every sourcing carried out is to ultimately serve a company's growth and financial health. Therefore, promoting strategic alliance and staying true to other company policies while procuring is a must.


A Befitting Example to Understand the Importance of Strategizing

Let’s understand the relevance of planning while procuring with a small example.

importance of strategizing

Raju has an electronic shop named Raju’s Electronics he wants his store to be the go electronic store in the neighborhood. From wireless chargers to air purifiers, he wants to sell them all. But where will Raju source all these goods from? He did not spend much time on it. Went to a wholesale supplier of electronics and bought a couple of gadgets and daily needed items to penetrate the neighborhood.


The supplier delivered the goods, and Raju was very happy as he got a good deal on those products. Once his shop was set up, customers started pouring in charging cables, phone stands, mini fridges, etc. After a week, they came to Raju complaining about the products not working and wanting to return them. Raju refunded their money, thinking he could get the same from the supplier.

Raju packs all the goods and brings them back to the supplier, he says, we cannot take back the goods once sold that’s our policy, which is why you got a good deal on them. Raju was shocked and felt stupid that he did not enquire about the other suppliers or did enough market research to find reliable suppliers with fair policies.


What if Raju had a procurement strategy in place?

Raju’s sourcing experience would have been different with a procurement plan. He would have done the following things differently:

  • Proper market research to find a reliable supplier by getting quotes from different suppliers.
  • Drafted a proper contract covering delivery schedule, return of goods, quality assurance, and more.
  • Focused beyond cost-saving aspects like the return of goods clause to the supplier in case of quality issues.
  • Would have sourced more goods based on the market trends and neighbourhood needs


Raju could have saved the reputation of his brand. Now, he would be known in the neighborhood as someone who sells faulty products.


Different Types of Strategies in Procurement

Now, let’s get into the interesting part. What are the different procurement strategies out there? We have listed a few below. Let’s check them out.

Negotiating Better Deals with Suppliers

Striking better deals with suppliers is one way to go. Negotiation strategies in procurement vary according to the kind of supplier you are dealing with. Nevertheless, here are some pointers:

  • Study the market, know your needs and budget priorities and try cultivating a relationship with the supplier.
  • Understand the supplier’s perspective, needs and constraints for a fair deal.
  • Negotiate on different terms apart from the payment, like the delivery, after-sales service, and factors impacting the overall experience.
  • Highlight your strengths to woo the supplier like entering a new market, long-term contract, other business opportunities, etc., to drive the negotiation.
  • It’s good to be flexible and look for a win-win situation. If not, be prepared to walk away as well.
  • The last but most important, document your deal always to avoid future misunderstandings


Identifying and Eliminating Waste

Another crucial cost saving strategy in procurement is eliminating waste. You can achieve this in the following way:

  • With value stream mapping, identify the waste in the procurement process, such as excess inventory, overproduction, process duplication, etc.
  • Now, apply lean principles to minimize lead time and eliminate activities adding no value.
  • Take a rerun at your supplier and only keep a few offering quality and service.
  • Managing inventory efficiency can help a lot. You can try demand forecasting rather than keeping an excess inventory.
  • Always look for ways to improve and adopt sustainable practices.


Optimizing Inventory Management

Another way to streamline the procurement process is to optimize the inventory. It’s vital for reducing costs and saving big. There are many ways to optimize inventory, like the following:

  • Study your purchase history and try to forecast your demand, like how Amazon’s business analytics tools analyze your order history and streamline purchasing for you.
  • Try Just in Time (JIT) inventory to minimize the storage cost by receiving goods only when necessary, like cleaning supplies or pantry items.
  • Always maintain a safe stock to tackle low stock or unexpected supply shortages.
  • Collaborate with your suppliers to ensure timely delivery, minimize lead time, and reduce excess inventory.
  • Track and monitor your inventory to identify the least used items, stock level, bad inventory, etc.
  • Categorize and classify your inventory based on value, alerting the management to prioritize them


Leveraging Technology for Cost Savings

Embedding technology is a great idea to optimize procurement. Incorporating automation and software could reduce the cost and burden of repetitive tasks. There are many technological adjustments you could incorporate like the following:

  • E-procurement systems for automating the requisition to payment process in procurement
  • Vendor management software to centralize your suppliers and keep a tab
  • Spend analysis tools to track your spending and identify cost-saving avenues
  • Compliance tools to ensure the procurement process aligns with the legal and organizational laws
  • Automating certain aspects of inventory management
  • Utilizing data analytics and AI to assess procurement trends and cost-saving purchasing strategies.


Risk Management Strategies

Another way to strategize your procurement is to use the risk management method. Under risk management, you identify, assess, and mitigate the risks associated with the procurement process to streamline it more. Some of the key aspects of this strategy include the following:

  • Uncovering the potential risks that could hamper the procurement process, like supplier failure, quality issues, price change, or disruptions in the supply chain.
  • Next, you assess the identified risks and prioritize them based on the significance of the procurement process.
  • The next step is to mitigate the risk by finding solutions to it, like tapping into more suppliers, having a price lock clause in the contract, or backup plan.


Innovation Strategies

Innovation is always appreciated as it stimulates the growth of an organization. Don't shy away from incorporating innovative elements while devising procurement strategies.  There are many ways to go about it, some of them are mentioned below:

  • Try collaborating with suppliers on new product development. You could be the next one to introduce a revolutionary product, so brainstorm with your supplier and try inventing new products in your sector.
  • Exploring emerging technologies. AI is all the rage right now. Experience how it can help improve procurement.
  • Investing in research and development is always a good way to spend money. If you are not taking this risk, there will be no advancement.
  • Encouraging a culture of innovation within your procurement team. Create a space or engagement activity where team members can pitch ideas or improve process or procurement strategies.


Relationship Management Strategies

Nothing beats the strength of a good relationship. In the case of procurement, having a steady and reliable relationship with your suppliers is vital. All planning and strategizing for procurement, sourcing, and improving the supply chain would prove futile if you overlook building relationships with your suppliers. Make sure to check up on your suppliers and do the following:

  • Building trust and collaboration with suppliers
  • Communicating openly and honestly
  • Providing timely feedback
  • Recognizing and rewarding supplier performance


How to Build a Full-Proof Strategy for Procurement?

You now know the different procurement strategies out there but which one to follow? How to find the one that aligns with your business requirements? Don’t worry we will answer these questions right away.


Here are some simple steps to build an effective procurement strategy:

strategy for procurement

Know Your Business Needs:

Understand the needs of your business to improve or build a strategy. This involves assessing the future and current procurement needs, future business goals and objectives, company finances, and new undertaking or project requirements demanding sourcing, etc.


Market Analysis:

The next obvious move is to assess the supply markets, their conditions, new players, price fluctuations, trends, etc. Understand the market conditions and collect and compile the required data.


Define your Goals:

Clearly define or pen down what needs to be achieved and set your procurement goals straight. Now, prioritize these goals based on their urgencies. Say you need supplies for an upcoming project starting next week, even though it’s a small requirement, it shoots to the top of the list.


Develop your Sourcing Strategy:

Now, think about how to source the goods or services required for each goal you have set and prioritized. The sourcing strategy considers factors like quality of goods or services, reliability and track record of the supplier, negotiating cost, and others. The key is to find the best way to source the goods and services to fulfill your procurement needs.


Develop Procurement Strategy:

Now you planned how to source, develop a procurement strategy, and document it if you must. Ensure it adheres to your organization's procurement policies and compliance. Don’t forget the plan for the potential risks while crafting your strategy.


Optimize your Process:

There’s always room for improvement, so after you execute and implement your strategy, monitor and discover places that need improvement or identify if there are any gaps in your process. Keep checking to optimize the process.


How Can Automation Help in the Entire Purchasing Journey?

Automation plays a vital role in simplifying procurement. Your purchase journey could be eased and simplified with a touch of automation in the following aspects:

purchasing automation

❒  Requisition: The internal requisition process could be automated by providing pre-populated forms with relevant information to minimize errors and the inclusion of required information.


❒  Workflow: The approval workflow for the purchasing journey could be automated, where the approvals the automatically routed to the concerned teams or individuals based on pre-set rules aligning with organizational hierarchy and compliance.


❒  Supplier Selection: The supplier selection process can be streamlined with automation, where suppliers are selected from a centralized database based on the procurement requirement. Similarly, to manage suppliers, automation also comes in handy.


❒  Generating Purchase Order: The manual entry of specifications of the PO could be eliminated altogether by generating POs from the approved requisitions.


❒  Order Processing: Automation can also track the order processing by live-tracking the order status, expected delivery, etc., improving communication with the suppliers.


❒  Invoice and Payment: Similarly, automation can help with invoice generation based on purchase orders and receipts. And the approved invoices could initiate the payment process.


❒  Analytics: Automation also proves beneficial in tracking spending, uncovering trends, studying market fluctuations, and assessing purchasing data to make informed business decisions.


Amazon Tools That Can Help You Stay Ahead of Your Procurement Plan

Amazon Business is your ideal partner for your procurement needs. Our reputation, reliability, service, and product quality precedes us. From sourcing goods to procuring them, Amazon Business could fulfil your bulk orders and product requirement seamlessly. We have various tools at our disposal to enable your procurement plan. Some of them are mentioned below:

❒  Vast Inventory: Our inventory is huge, housing a variety of products needed across industries. From IT, Education, MRO & industrial supplies, Nonprofit, office supplies, electronics, corporate needs, medical supplies, etc., we have them all.


❒  Bulk Orders & Bulk Discounts: We ensure cost savings while you source your goods or products from us with bulk orders and bulk discounts. You can place humongous orders while saving huge on them. Additionally, you can also save an extra 28% with GST invoices.


❒  Reputed and Reliable Vendors: We also house reliable wholesale vendors to make your e-procurement easy and fast. You can collaborate with multiple suppliers online and get quotes before finding your ideal match.


❒  Corporate Gifting Store: Our corporate gifting store is the perfect platform for sending special gifts to your corporate clients, suppliers, esteemed consumers, etc. Our muti-address delivery ensures you clients located across the state or country receive their gift on time.


❒  Business Analytics Tool:  Amazon’s business analytics tools ensure you have data-driven insights on your spending by studying your purchasing history to optimize spending. You can easily streamline order processing with our multiple reports like shipment, refund, return, order, etc.


❒  Compliance Tool: We also have compliance tools to regulate your procurement process, like enabling GST-compliant products to save more on GST input tax credit.


❒  Three Way Matching: To further reduce human error and manual work, Amazon has also introduced three way matching software to manage, track, and reconcile their orders or purchases. It automatically matches the purchase order with the product information with the received and confirmation feature.


❒  Amazon Business APP: All the benefits and perks are readily available on our Amazon Business app and website to personalize your procurement and shopping experience. Create your free account with us today!


Other Benefits of Amazon Business in Outlining Your Purchases

That’s not all, Amazon Business goes above and beyond for their business consumers by hosting multiple business-exclusive events and sales encouraging savings. Business Value Days, Stock Up Sale, EMI Fest, Great Indian Sale, Prime Day Sale, Small Business Days, etc., are some sale events offering attractive deals and huge savings.

Moreover, our grade-A customer service and doorstep delivery, and business-friendly payment modes make us ideal for your B2B purchases. Register with us today and enjoy these perks!


  • Some of the strategies for procurement small businesses could follow include:

    ●  Build strong relationships with suppliers

    ●  Prepare for potential risks disrupting the supply chain

    ●  Opt for procurement cost reduction strategies

    ●  Use e-procurement platforms

    ●  Hire external aid for procurement and outsourcing strategies. At least outsource the non-core activities like sourcing, supplier management, and contract management.


    Here are a few purchasing strategies to consider:


           Global sourcing


           Green purchasing


           Vendor relationship management


           Risk management


           Cost leadership


           Quality Emphasis


           Lean inventory


           Centralized purchasing

    ●    Decentralized purchasing


  • Procurement and sourcing strategies are very closely related concepts, but they are different in the following manner:

    ●  Sourcing strategy forms a subset of the more elaborate procurement strategy

    ●  Sourcing concerns with identifying, evaluating, and fixing a supplier for goods, while procurement encompasses the entire process of acquiring the goods

    ●  Sourcing focuses on finding the best supplier, while procurement is also about the service, reliability, quality, complexity of acquiring the goods, and more.

  • Here’s a quick go-to on creating a procurement process:

    ●  Assess your current state

    ●  Define new goals and objective

    ●  Understand the organizational needs, internal and external

    ●  Conduct market analysis

    ●  Develop a strategy justifying your goals and needs

    ●  Implement the strategy

    ●  Monitor and modify

    ●  Optimize it for further improvements

  • If you have a defined and well-thought procurement plan, it will definitely benefit your business and reflect positively in the following aspects:

    ●  Cost savings

    ●  Mitigating risks

    ●  Efficiency

    ●  Supplier relationship

    ●  Compliance

    ●  Inventory management

    ●  Accountability and transparency

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