Methodologies Applied in Procurement/Purchasing
Over time, procurement processes have been refined—not only through automation and the pursuit of digitalization, but also by utilizing tools and methods that support analysis and decision-making; this also applies to Procurement methodologies.
This article will be published in two parts. Here, we will discuss traditional management methodologies that can be and are used in the daily routine of the Department. In the second part, we will present methodologies developed specifically for the Procurement Area, as well as some agile methodologies being introduced into the Procurement context to assist in various ways.
The Pareto Principle or 80/20 Rule
Concept: This method was developed at the beginning of the last century, demonstrating that 80% of results depend on 20% of causes or efforts.
Application: This method is used across various areas; however, when applied to Procurement, it can be used daily to direct team efforts or even define a sourcing strategy. We typically apply the Pareto principle in Procurement from two perspectives:
- Purchase Orders: To design and execute an automation plan for high-volume purchase orders that carry low financial impact, focusing on reducing the operational burden.
- Spend: We evaluate the Procurement department's expenditures using the Pareto principle to define category management strategies and establish the scope of a sourcing process.
The Pareto principles serve as the foundation for another crucial metric: the ABC Analysis. This metric is widely applied to inventory management within the supply chain, as well as to categorize suppliers into tiers of relevance.
SWOT Analysis
Concept: A tool designed to analyze scenarios and strategies for a company, department, or project. This methodology evaluates 4 aspects:
- Strengths and Weaknesses, assessing the internal environment;
- Opportunities and Threats, for the external environment.
Application: This is another methodology used across various areas to support planning. In Procurement, it is an essential tool for category management modeling, where we can evaluate the execution approach, strategies, and supplier relationships for the category.
For example, if we have a Technology category, we evaluate how that service is being procured, as well as the risks and opportunities for innovation or scope changes that can deliver financial and quality gains for the company.
Typically, the SWOT analysis and the cross-referencing of these aspects generate a medium- and long-term plan, paving the way for other frameworks such as the risk matrix.
Stakeholder Matrix
Concept: The primary objective of this matrix is the mapping and engagement of stakeholders, whether from the perspective of the Company, Department, or Project. When evaluating stakeholders, several criteria determine their position on the matrix—most commonly influence and interest. Above all, positioning them in quadrants enables the definition of tailored engagement, relationship, and communication models.
Application: This methodology, widely utilized in project management, is applied to internal corporate processes with a particular emphasis on ESG. In Procurement, we use the matrix strategically, given that sourcing projects require the involvement of key stakeholders such as the requesting department, Warehouse, Logistics, among others. Consequently, the stakeholder matrix provides not only guidance for communication, but also the preparation for critical interdepartmental activities, such as contract signing or product homologation.
OKR – Objectives and Key Results
Concept: Its purpose is to structure organizational actions aimed at achieving goals in an agile and efficient manner. This method focuses on objectives and key results delivered in cycles—from defining the OKR to execution, and ultimately tracking results.
Application: This method is an organizational tool that supports the definition of objectives and targets. In Procurement, for instance, it aligns with key departmental goals such as savings, automation, service delivery, and more.
We will discuss more about this…
Finally, in the next article, I will share examples of methodologies developed to streamline or enhance Procurement results for application across the department's processes.
Article written by: Guilherme Viveiros, Project Manager at Level Group BR
