Strategic sourcing and procurement is a critical aspect of supply chain management. While supply chain management career paths are expansive, procurement career paths are also quite extensive as well.
Categories of spend are diverse as well and cover raw materials, components, packaging, and finished goods on the Direct procurement side, as well as business-related equipment and services on the Indirect procurement side, ranging from temporary labor, accounting, information technology, MRO, and many more.
If you’re considering or beginning a career in strategic sourcing and procurement you may find that it’s overwhelming to gain a comprehensive understanding of the myriad of procurement career paths to choose from and ultimately decide where to build your career.
To help, we’ve put together a high-level overview of the various career paths that exist within the field of strategic sourcing and procurement to help you understand what to consider when evaluating and selecting the right career path for you.
What is Strategic Sourcing & Procurement?
As defined by the Institute of Supply Management, procurement is an organizational function that includes specifications development, value analysis, supplier market research, negotiation, buying activities, contract administration, inventory control, traffic, receiving, and stores.
Procurement professionals help to ensure a buyer receives goods, services, or works at the best possible price when considering quality, quantity, time, and location. Almost all purchasing decisions include factors such as delivery and handling, marginal benefit, and price fluctuations.
While the discipline encompasses a wide variety of areas, there are a few important things to distinguish within procurement:
- Direct: This involves sourcing for any materials, including raw materials, commodities, components, and finished goods, that made available for sale or resale.
- for Retailers- any product available for purchase
- for Food manufacturers- all ingredients used to manufacture a finished good, along with packaging
- for Automotive companies– all components assembled into a new vehicle
- Indirect (services): Sourcing and procuring services or supplies to support the ongoing needs of a business that are not sold to customers.
- Machinery used to manufacture products
- Information Technology such as computers, printers, and phones
- Utilities such as power and water
- Service Providers such as 3PLs, Auditors, Consulting Firms,
- Temp Labor, Insurance, Facilities Maintenance, etc.
- Tactical Sourcing: A short-term, transactional activity, commonly in small to medium-size manufacturing organizations. Tactical sourcing involves routine and sometimes reactive approaches to purchasing materials & supplies.
- Strategic Sourcing: A long-term and holistic approach to acquiring the current & future needs of an organization at the lowest total cost of ownership (TCO) and lowest supply risk. This process creates a link between the customer and the supplier to ensure continuous improvement in quality, delivery, cost, and service while providing the means to achieve optimal efficiencies.
Most large corporations have revamped their procurement organizations over the years to separate the strategic sourcing function from the operational side of procurement. This allows a stronger and more proactive focus on strategic sourcing and ensures that the procurement organization as a whole is adding maximum value as it relates to quality, cost, service and risk mitigation.
Within procurement, it’s important to have a high-level understanding of the lifecycle that’s involved. The Chartered Institute of Procurement and Supply (CIPS) has put together an interactive breakdown of the cyclical process of key steps when procuring goods or services.
In summary, the typical steps include:
- Understand the need and develop a high-level specification involving stakeholders
- Research the options available in the marketplace to identify potential suppliers and the competition
- Develop the strategy and plan (considering the external environment impact)
- Test the market or strategy to identify if it’s the right time to go to market
- Develop documentation including a detailed breakdown of the volumes, service level agreement, terms and conditions, and a detailed specification
- Conduct an RFI (Request for Information) to gain insights into suppliers, size, capabilities, financials, strengths, and weaknesses before accessing if they should be included in the tender process
- Send out RFQ (Request for Quotation) and/or RFP (Request for Proposal) to potential suppliers
- Evaluate bids to select the preferred supplier
- Award contract to selected supplier – flesh out the terms and conditions to minimize risks and exposure
- Consider the warehouse operations in terms of the product coding and classification, space, layout and racking, frequency of deliveries, and order processing
- Periodically review of performance against Key Performance Indicators (KPI’s) set out in the contract along with discussions on how the relationship is working and resolve any conflicts that have arisen
- Conduct assessments over time on whether the business requirements have changed, the agreement is still required, what can be learned from the process and how this can be incorporated to improve the process next time.
Skills to Develop & Refine
After having a better understanding of strategic sourcing and procurement, it’s important to understand some of the core competencies and skills needed for success:
- Attention to Detail
- Relationship Building
- Problem Solving
- Strategic Thinking
- Time Management / Project Management
- Influencing / Change Management
- Financial Acumen
Traditional Career Paths
When it comes to career paths, consider the different levels that exist in procurement:
Sample Job Titles
- Procurement Analyst
- Purchasing Analyst
- Purchasing Agent
- Procurement Specialist
- Procurement Manager
- Purchasing Manager
- Director of Global Procurement
- Sourcing Manager
- Supplier Development Manager
- Category Manager
- Commodity Manager
- XVP of Procurement
- XVP of Sourcing
- Chief Procurement Officer
Typical Job Responsibilities/ Tasks
- Research & compare products and services from suppliers
- Specialize in one specific aspect of the procurement process
- Communicate frequently with vendors
- Prepare reports on the suppliers and vendors and submit them for review
- Choose suppliers and the merchandise or services needed to meet customer needs
- Negotiate with vendors
- Work out contract terms
- Travel to attend industry events or meet with suppliers.
- In charge of purchasing the right resources at the right time, in the right quantity, and at the right price
- Developing and facilitating efficient procurement strategies
- Management and administration of the company’s acquisition programs
- Oversees the entire procurement department, processes, staff and systems
- Establishing communication and relationships with vendors
Procurement Career Paths Differ by Industry and Company Size
It’s also critical to remember that procurement roles, responsibilities, and career paths vary across industries and by company size.
From a company size perspective:
- Smaller Organizations
- Typically have a leaner team but broader exposure to the full procurement lifecycle and multiple spend categories on both the direct and indirect side
- Likely be in a position to personally make a bigger impact on the success of the company
- May not have the level of career advancement or resources such as advanced systems, mature processes that you would find in many larger corporations
- Larger Organizations:
- More career paths to choose from within procurement
- More opportunities for advancement
- Common to have a much narrower focus as it relates to spend categories versus smaller companies
Things can also differ from an industry perspective, especially when you compare and contrast manufacturers, retailers, and wholesalers. For example, the responsibilities in Retail are much different than in Manufacturing.
Retail procurement is commonly referred to as “Merchandising” where the Merchants not only purchase finished goods but also influence decisions. These can relate to things such as:
- the product assortment carried by store or region of stores
- product placement on store shelves and online retail stores
- special promotions that range from new product launches to holiday promotions to end-of-season sales
- and more
Procurement professionals in Manufacturing industries are typically segmented by commodities or materials that are used in the production process for a finished good. For example, a large pizza manufacturer could have a Buyer over each primary category used in the pizza production process e.g. sauces, doughs, cheeses, vegetables, proteins, and packaging.
Lastly, if you choose to explore careers within the Indirect side of procurement, you’ll find that industry experience isn’t as important as it is on the Direct side of procurement. This can be advantageous if you wish to explore different industries throughout your career.
Before venturing down your procurement career path, it’s important to have a strong understanding of the different areas within procurement and how the career paths can vary.
From different industries to job levels to skills needed, hopefully, you’ve developed a better understanding of what to consider when evaluating and selecting the right procurement career path for you!
If you find yourself looking for procurement opportunities: