Mid-market procurement and its importance for the manufacturing sector continues to be underestimated. Low bargaining power and staff shortages in procurement departments of small and mid-sized companies often lead to the assumption that one must simply adapt to their suppliers and global raw material prices. 

Yet particularly in the procurement of industrial mid-sized companies, the procurement department has an unexpectedly high leverage that is too often overlooked. After all, direct material expenditures and purchased services account for an average of around 50% of company costs, making them one of the main cost drivers.

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Due to rising inflation, global raw material shortages, and other crisis hotspots, industrial mid-sized companies face entirely new challenges that do not make the buyer's life any easier. So why engage with strategic topics right now, when the workday already seems to have no end?

Does My Procurement Really Need a Strategic Function?

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Especially in times of supply bottlenecks, raw material shortages, and strained global markets, many mid-sized companies can no longer afford to forgo a strategic orientation of their procurement activities. Due to limited resources, staffing issues, and time constraints, mid-sized companies already face enough challenges that make engaging with additional topics difficult.

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To integrate a strategic component into a procurement department, a separate department is usually not necessary: often it is enough to train existing employees who perform important operational work in strategic topics.  In addition to the Chamber of Industry and Commerce, BME as well as numerous private providers offer training courses and seminars on strategic thinking, negotiation skills, or the use of selected tools in your own procurement department.

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Especially on the digital level, there is now a whole range of tools that can take over important work in strategic procurement. Some are even specifically tailored to the needs of strategic procurement in mid-sized companies and can be integrated into existing systems without long implementation times.

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Simplify strategic procurement with Tacto

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Core Tasks of the Strategic Buyer

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Compared to operational procurement, strategic procurement actively engages with suppliers, seeks to optimize performance, and finds savings potential in the supply chain. The tasks are diverse in nature and can vary by industry. The core tasks can be divided into three sub-areas.

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Supplier Management & Market Analysis

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A key focus in the work of the strategic buyer is the active engagement with the company's suppliers and sub-suppliers. This work is not limited to examining quantitative delivery data and price developments but rather serves the long-term cultivation of good relationships. The supplier is figuratively taken by the hand by the strategic buyer and informed about the company's long-term goals and plans regarding growth and development. 

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On the one hand, the optimization and discussion regarding short-term stability, costs, and quality are naturally at the forefront. On the other hand, it is primarily about connecting the company name with a face to whom a relationship can be built. Long-term, good contacts pay off double or triple, especially in times of crisis.

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Active Commodity Group Management 

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Commodity group management is based on the idea of managing commodity groups as strategic business units. Multiple items can be grouped into logical sub-areas that share a common characteristic (e.g., intended use or origin). 

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Active commodity group management offers the strategic buyer the opportunity for the company and supplier to work together efficiently to optimize the commodity groups with combined expertise, without getting lost at the individual item level.

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This creates a procurement structure that is better aligned with the company's needs and requirements. Additionally, in practice, this increases value creation and profit.

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Reporting to Management and Involvement in Manufacturing Decisions

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Procurement represents the business area with the most cross-departmental as well as external interfaces. A strategic buyer must coordinate with multiple departments simultaneously while maintaining an overview.

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In strategic procurement, methods of data collection, spend analysis, and market research are combined to obtain an overview of all relevant markets. Insights gained are incorporated into decision-making. This makes it necessary for the collected information to be communicated to all decision-makers, in order to find the best possible solution for both the strategically long-term oriented management and the relevant manufacturing and planning departments. The procurement strategy must be aligned with the company's overall strategy so that it can then be quickly and efficiently executed in operational procurement.

Mid-market procurement and its importance for the manufacturing sector continues to be underestimated. Why strategic procurement makes sense even for mid-sized companies.