What procurement strategy?

I’ve just taken on the role of an industrial buyer in an SME that produces small to medium-sized batches of products for large industrial clients. My portfolio mainly consists of primary raw materials like steel, as well as laser cutting, oxycutting, machining, fasteners, and subcontracted operations.

Currently, there is no structured purchasing strategy — projects are assigned to suppliers without clear criteria such as price or volume. Additionally, the ERP system is poorly maintained, making it difficult to access historical data.

Question: What would be the best course of action to establish an effective procurement strategy?

AIMDRIVE-AI Solution:

Given the lack of a structured purchasing strategy, the first step is to establish a process that ensures cost control, supplier selection, and risk management while maintaining quality and timely delivery. To achieve this, engage in the following analysis to ensure purchasing decisions are competitive:

1. Price Analysis: Look at benchmarks related to the trend in price changes over time. Comparing current prices with industry standards and historical data can highlight price optimization or cost reduction opportunities. Identifying pricing trends will also help determine whether we are paying competitive rates or if there’s room for negotiation.

2. Cost Analysis: For non-standard purchases where industry benchmarks aren’t available, breaking down supplier pricing into material costs, labor, overhead, and profit margins is essential. Developing a should-cost model based on market data helps determine a fair price, allowing for more effective supplier negotiations. This approach can also highlight supplier inefficiencies, cost containment opportunities, and strategic sourcing improvements.

AI tools like AIMDRIVE-AI (Free) can help automate research and analysis on any category of spend, making it easier to track costs, compare suppliers, and bring structure to procurement decisions.

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