9 Innovative Purchasing Concepts for Procurement
Implement various innovative purchasing concepts to ditch the old-school way of doing things and bring your procurement function up to speed.
By Hugo Britt | March 7, 2023
Ask any old-school procurement professional about the “how” of procurement, and they will point you to the same sourcing cycle that has been used for decades:
- Define your business needs
- Float the RFQ
- Evaluate and select suppliers
- Negotiate and sign the agreement
It’s a framework that has stood the test of time, but that doesn’t mean that it can’t be improved.
Innovative purchasing concepts
Getting innovative in purchasing doesn’t necessarily mean leveraging the latest piece of technology. “Innovation” can simply mean finding smarter ways to do things by tweaking a process, removing waste, or speeding up time-to-source.
Below, we explore nine different innovative purchasing concepts to help you start thinking outside of the box.
The "old-school" way of structuring a procurement function has stood the test of time. That doesn't mean, however, that it can't be improved and brought up to speed.
Automate everything
The next time you’re at a procurement conference, take a walk around the exhibitor hall and you’ll quickly come to realize that there’s a tech solution for automating every part of the sourcing cycle. Procurement process automation can involve anything from automated supplier discovery, risk monitoring, payment processing, spend analytics, and contract approval.
The exciting part is that automation frees up your team for big-picture projects, supplier relationship management, strategic planning, and continuous improvement.
How to innovate: Identify the most manual and time-consuming part of your sourcing cycle, look at the solutions available, automate it, and move on to the next.
Prioritize factors beyond cost
We often talk about looking beyond the lowest price when assessing suppliers, but this approach still assumes cost and risk will be the top two considerations. An innovative approach to sourcing, which will depend heavily on your organization’s needs, is to push these considerations down the list and prioritize other factors such as finding suppliers with the lowest environmental impact to support your organization’s sustainability goals, or finding diverse suppliers to support your organization’s D&I goals.
How to innovate: Identify your organization’s most pressing non-financial priorities (such as sustainability) and re-work your criteria to attract suppliers that match this need.
Employ lean procurement principles
For some organizations, getting Lean in procurement simply involves doing things faster. For example, you may choose to replace time-consuming and complex procurement processes with a compressed approach wherein preparation time is slashed, partners are all evaluated together in a single-day workshop, and documentation is limited to a plan-on-a-page approach.
In other companies, “Lean” may mean reducing the costs involved in procurement. After all, procurement teams are supposed to be the cost-cutting experts, so an unnecessarily expensive and wasteful function goes against procurement’s central mission. Getting Lean may therefore mean finding ways to reduce cost-to-source, or reducing the team headcount and doing more with less.
How to innovate: Reduce your multi-page RFX documentation to a Lean “plan on a page”.
Negotiate in areas other than pricing
If a supplier negotiation has reached an impasse, this doesn’t necessarily mean it is doomed to failure. Take an innovative approach by looking at areas of the contract outside of pricing, such as offering new payment terms, changing the warranty, altering shipping fees, offering bonuses, and so on.
How to innovate: Consider everything in the contract to be negotiable. Ask the supplier questions to identify areas where they might be interested in negotiating outside of pricing.
Host supplier hack-a-thons
Save time by creating a pool of pre-qualified suppliers for specific goods or services, and then inviting them to compete for individual contracts through a one-day workshop or series of mini-competitions.
How to innovate: Invite several suppliers for a one-day workshop, share your business challenge, and invite them to come up with innovative solutions.
Utilizing innovative purchasing concepts like automation, supplier relationship development, and prioritizing factors other than cost can help modernize your procurement function.
Run a reverse auction
Reverse auctions aren’t new, but they’re undeniably innovative. This approach involves using an online platform to invite suppliers to bid against each other for a contract in order to drive prices down.
How to innovate: Invest in a procurement platform with reverse-auction capabilities.
Present suppliers with a business challenge to solve
Forget multi-page RFQs and cut it back to the essentials: go to market with a simple statement of the challenge your business seeks to solve, then leave it up to suppliers to provide creative solutions at the best price.
How to innovate: Throw out the RFQ template, present suppliers with a business challenge to solve, and then leave the rest to them.
Go beyond supplier collaboration to true partnership
Procurement professionals often speak about their strategic suppliers as “partners,” but the relationship is still essentially that of buyer and vendor. A true partnership involves pooling resources to create new value.
McKinsey explains: “Buyers and suppliers can work together to develop innovative new products, for example, boosting revenues and profits for both parties. They can take an integrated approach to supply-chain optimization, redesigning their processes together to reduce waste and redundant effort, or jointly purchasing raw materials. Or they can collaborate in forecasting, planning, and capacity management—thereby improving service levels, mitigating risks, and strengthening the combined supply chain.”
How to innovate: Consider which of your suppliers could bring the most value to the table through a formal partnership, then approach them with a win-win offer.
Join a group purchasing organization
Joining a GPO is an innovative way to dramatically increase your buying power to unlock deep discounts that would be otherwise out of reach. With Una, members gain access to over 5,000 pre-negotiated contracts with some of the best supplier partners in the country. The contracts Una has in place offer members an unmatched degree of price protection, locking in prices for several years at a time.
How to innovate: Simply pick up the phone and give Una a call to start saving money, time, and effort.
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