The objective of this paper is to review numerous pieces of literature on procurement strategy. The study discusses supply relations management (SRM), exit strategies, and category management to connect them and procurement methods. Additionally, various corporations and corporate groups highlight the benefits and challenges associated with effective procurement methods. Among these is the fact that intelligent sourcing enables businesses to capitalize on frequently neglected warranties and incentives. A streamlined purchasing strategy allows a company to understand its budget and resource utilization better. Additionally, the EU and the UK have secured a trade agreement, thereby ending any post-Brexit contingency measures. Regulatory and policy reforms have touched the bulk of UK sectors. Finally, because Brexit creates a new environment for most UK businesses, adopting and developing new sourcing strategies may help them survive in an ever-competitive economic industry.
Logistics managers have been gaining prominence in private sector businesses, frequently taking part in corporate strategy development and being viewed as essential members by other units. Procurement may contribute significantly to value creation and strategic edge, improving a company’s effectiveness (Khojasteh, 2021). However, this introduces additional issues and necessitates a higher sophistication in handling the procurement section’s procurement activities, instruments, and architecture (Khojasteh, 2021). A procurement strategy is a method through which a construction process progresses from the initial planning stages to execution and utilization by the structure’s occupants (de Oliveira et al., 2021). The most straightforward procurement approach is founded solely on the firm’s work progress. This paper aims to review the different literature surrounding procurement strategy. Additionally, the paper will analyze the effects of Brexit on worldwide procurement methodology and will examine successful strategies for mitigating procurement department issues.
Numerous scholars have sought to categorize the aspects of corporate performance that can be attributed to procurement. Environmental sustainability approaches, according to researchers, result in tremendous financial success. Ghosh (2019) examined how environmental procurement affects organizational effectiveness. He demonstrated, through surveys and structured observations, that environmental purchases were highly associated with corporate productivity. Ghosh (2019) enumerated that enterprises with established sustainability practices had a significantly positive relationship with several operational efficiency measures. Additionally, Ghosh (2019) discovered that adopting green procurement practices improved enterprises’ financial and operational success. He distinguished three forms of performance: ecological, economic, and functional effectiveness. However, despite the survey link being left open for over nine months and continuous follow-ups via e-mails and phone calls, just eighty satisfactory replies were generated. Therefore, the sample respondent from Ghosh (2019) study was relatively small considering the diverse industrial sector in India. According to another research published by Bag et al. (2020), the procurement process includes purchasing and supply operations and import and export logistics control. These tasks take most of the time for industrial companies while fulfilling sales invoices and can thus be regarded as a critical component of the business’s viability. Supplier analysis is vital since it might affect delivering timeframes.
Additionally, the purchasing concession agreement affects processing times. Furthermore, Bag et al. (2020) imply that procurement cycle times can vary depending on vendor cooperation. Procurement strategy may be considerably improved by strategic procurement and the company’s adaptability (Bag et al., 2020). Bag et al. (2021) research fails to establish a clear hypothesis on the effect of procurement strategy 4.0 on less developed economies with low technological levels. Kumar and Ganguly (2020) discovered a clear correlation between the exterior spread of e-procurement and communication openness in their analysis. According to Kumar and Ganguly (2020), integrity is the data flow within and outside the government agency. For the context of this research, data transparency refers to the timely presentation of all pertinent information about transactions on an e-procurement network to all counterparties (Kumar & Ganguly, 2020). Thus, prompt submission of records about tenders such as bid eligibility conditions, contractor selection methodology, and needed volume.
Presentation on an e-procurement framework and transmitting data about the accomplishment of a tender, such as a bid evaluation and winning distributor, are considered proposals aimed at increasing accountability (Kumar & Ganguly, 2020). Therefore, outward dissemination of e-procurement will contribute to expanded disclosures by providing vendors with genuine accessibility into tenders. The study by Kumar and Ganguly (2020) majorly focused on respondents from large business corporations, and SMEs were not considered.
Supplier management is the connection that develops between a customer and a distributor. Depending on the significance of the commodities or services purchased and delivered into an organization, this partnership specifies the nature of cooperation that an enterprise should seek to establish with its distributors (Amoako-Gyampah et al., 2019). Amoako-Gyampah et al. (2019) demonstrated that Supplier Relation Management (SRM) has grown incredibly influential as logistics companies outsource at an accelerating trend. Furthermore, Amoako-Gyampah et al. (2019) found that SRM is instrumental in supporting the organization to react dynamically to unanticipated emerging trends. Therefore, competitiveness in today’s business environment needs organizations to look past operational management excellence and place a premium on proactive purchasing and cooperative interaction capabilities to implement value throughout the distribution network. The study by Amoako-Gyampah et al. (2019) focuses solely on flexible capability measures in SRM. It fails to address operational capability measures such as the effectiveness and technology of SRM in procurement.
Similar to how cooperation has been conceptualized as a procedure that evolves and incorporates alternatives in conversations, exit has been explored as a strategy in procurement management. An exit procedure occurs when the involved parties, whether individuals, project teams, or institutions, recognize their separation and disassociate themselves from the participation personalities created in their workplace (Woo, 2021). Woo (2021) established that a corporation might terminate its supplier relationship in the event of bad institutional events such as liquidation or that its vendors do not meet the company’s procurement criteria. Due to the small sample population, the investigation by Woo (2021) cannot judge the consequences of Interorganizational Corporation (IOC) members’ experiences. Grashuis & Franken (2020) enumerated that an exit strategy is a policy outlining how an organization will extract its assets while guaranteeing that the network’s objectives are not threatened and that development toward these objectives is maintained. Additionally, Grashuis & Franken (2020) found out that the advantages of the exit methodology should extend to non-project recipients. To constitute a plan, the exit strategy must have exit parameters and demonstrable achievement toward satisfying the requirements. Additionally, the approach must include a schedule for the exit paradigm, implementation plans and accountable stakeholders, and tools for tracking progress. The research by Grashuis & Franken (2020) had lost data and deleted observation from their survey; thus, their study did not reflect the total sample size.
The Kraljic Model is a paradigm that is used in procurement performance. According to Bianchini et al. (2019), the Kraljic Pyramid is a frequently utilized method for managing and prioritizing supplier relationships. It serves as an appropriate beginning point for systematic dialogues between multiple players in the company (Bianchini et al., 2019). Additionally, the Kraljic matrix assists buyers in establishing strategic initiatives. The Kraljic Model, as proposed by Bianchini et al. (2019), works effectively for SMEs, and thus more giant corporations are restricted in using the model. Category Management is one approach to categorizing the procurement processes, with teams responsible for purchasing equipment categories such as wood, paper goods, polymers, foundry, and weldments (Rendon & Snider, 2019). The teams buy all of the specifications of the company that comes under the category team. Rendon and Snider (2019) found out that the strategic management of commodity groupings is done through commercial relationships to increase productivity and revenue by meeting client and customer requirements.
The Benefits and Issues of Adopting and Implementing an Effective Procurement Strategy
There are numerous advantages associated with business firms and organizations that adopt effective procurement strategies. First, effective procurement strategies would cut costs by offering competitive bargains (Marter, 2019). By connecting sourcing strategies with how the business generates revenue, the organization better knows its place in the pyramid of corporate objectives (Marter, 2019). However, increased competitive pressure from new entrants and market standstill can affect productivity. One of the most critical aspects of developing or converting a procurement activity is modifying how the rest sees the company’s operation (Marter, 2019). To improve reputation, the action must pivot away from standard price competition and assist the firm in producing value for consumers.
Second, successful purchasing enables a business to reduce expenses by obtaining the best products, resources, and agreements. Effective sourcing also allows an enterprise to take advantage of frequently overlooked warranties and incentives (Handfield et al., 2019). Moreover, an efficient purchasing strategy empowers a corporation to understand better its budget and how resources are utilized. Therefore, this enables a corporation to leverage more cash flow by prolonging the payment schedule and assisting shareholders in forecasting the future (Lysons, 2020). Third, when a business’s procurement strategy is entirely operational, it results in the timely delivery of high-quality products and services (Wuni & Shen, 2020). Thus, this enables companies to respond to unpredictable events such as skill shortages or surpluses, environmental catastrophes, and economic turmoil.
Additionally, an efficient procurement procedure allows a firm to differentiate between productive and ineffective contractors. As a result, the industry’s whole distribution system will be enhanced, and underperforming vendors that fail to produce merchandise within stipulated boundaries may be reimbursed (Wuni & Shen, 2020). Lastly, due to the fierce rivalry organizations face, proprietors pursue any strategic advantage they may obtain to improve their goods or services (Loosemore & Reid, 2019). A well-managed procurement function enables a business to seek out novel items or services to provide customers (Loosemore & Reid, 2019). Additionally, when this occurs, the corporation may be ready to bargain preferential contracts with vendors.
However, some issues and limitations exist that businesses and organizations experience by not incorporating effective purchasing strategies in their supply chain management. Ineffective purchasing methodologies establish a poor relationship between the organization and its vendors (Chen & Natcher, 2019). In the procurement sector, having strong working relationships with vendors is critical for the efficient operation of the organization. Dealing with suppliers without employing any assessment form might result in inconsistencies in product requirements and negative customer experiences (Chen & Natcher, 2019). Effective communication is critical in many facets of a business. Inadequate product expertise can also result in suppliers providing inaccurate resources and offering faulty products (Chen & Natcher, 2019). As a result, the relationship’s expectations cannot be achieved, eroding working trust in future transactions.
How does Brexit Impact or Provide Opportunities
The EU and the UK have finally reached a trade agreement, thereby ending any post-Brexit contingency measures. Regulatory and policy developments have impacted the majority of sectors. First, Brexit has provided an opportunity for the UK energy sector to thrive (Cairney et al., 2019). Despite the COVID-19 pandemic and Brexit, the energy industry has performed exceptionally well over the last few years. At the beginning of 2020, suitable climatic patterns and new solar and wind infrastructure enabled sustainable energy sources to overtake hydrocarbons. Brexit has culminated in the UK exiting the European Union Emissions Trading System (EU ETS) and substituting the UK ETS (Cairney et al., 2019). Like the EU model, the UK ETS applies to energy-intensive businesses, the electricity sector, and aerospace.
On the other hand, the UK ETS will seek to cut the cap on allowable pollution by 5% and is touted to be the globe’s only net-zero emissions cap and trade economy (Cairney et al., 2019, p. 460). Second, Brexit has negatively affected the British healthcare system since integrating Brexit and health has not been a simple task for the government. Without a doubt, Brexit will impact the healthcare business, particularly on how medical equipment is approved and launched in the marketplace (McHale et al., 2021). Britain will no longer be required to comply with the scheduled EU Medical Device Regulation (MDR) and its accompanying In Vitro Diagnostics Medical Device Regulation (IVDR) following Brexit.
Market permissions granted by the MHRA will be limited to the UK, and new medications would require different EU clearance. New regulatory procedures at gateways and execution documentation could cause early delays for companies like GlaxoSmithKline Company (McHale et al., 2021). Third, Brexit has provided opportunities for the British Aviation sector in the bilateral deal establishing direct access between the EU and the United Kingdom (Latorre et al., 2020). Under the agreement terms, UK and EU airlines will retain flyover and operational privileges on paths connecting the two jurisdictions.
However, the UK will give up the power to contract with a foreign transit provider to convey products or travelers between two locations within the same nation. The accord grants the UK the authority for airlines to function on networks leading the UK to the EU through intervening sites and vice versa (Latorre et al., 2020). Additionally, the trade agreement enables reciprocal acknowledgment of flight safety credentials, performance accreditations, and permits obtained or approved by accredited authorities in the European Union or the United Kingdom (Latorre et al., 2020). Lastly, the UK rail industry, such as the London Northwestern Railway Company, is experiencing a record-breaking skill gap, and eliminating freedom of travel may exacerbate the situation.
How Companies and Organizations Respond and the Changes they could make to their Strategy
By managing supplier risk within the UK could prove effective as a cost-sensitive procurement plan almost usually entails taking chances. This arrogance is appropriate only if the implications of a potential vendor catastrophe are restricted to the commodity itself. For instance, evaluating a new provider on a readily available item within a day is a prudent technique. Lastly, because the supply chain of most of the companies within the UK was reduced following the Brexit, developing and training their personnel in procurement would prove vital. While constantly educating is a soft component of purchasing and sourcing approaches, it is possibly critical. Most procurement strategies require human intervention, and if those involved lack the essential expertise to execute the procurement plan, the process will fail to materialize.
In conclusion, procurement strategies play an essential role in the success of any business organization. An efficient purchasing strategy empowers a corporation to understand better its budget and how resources are utilized. Therefore, this enables a corporation to leverage more cash flow by prolonging the payment schedule and assisting shareholders in forecasting the future. However, inappropriate procurement strategies could lead to ineffective organizational structure and negative customer experiences. Therefore, it is upon the business to develop effective purchasing and sourcing strategies to maximize its market share and improve productivity.
Amoako-Gyampah, K., Boakye, K. G., Adaku, E., & Famiyeh, S. (2019). Supplier relationship management and firm performance in developing economies: A moderated mediation analysis of flexibility capability and ownership structure. International Journal of Production Economics, 208, 160-170.
Bag, S., Wood, L. C., Mangla, S. K., & Luthra, S. (2020). Procurement 4.0 and its implications on business process performance in a circular economy. Resources, Conservation and Recycling, 152, 104502.
Bianchini, A., Benci, A., Pellegrini, M., & Rossi, J. (2019). Supply chain redesign for lead-time reduction through Kraljic purchasing portfolio and AHP integration. Benchmarking: An International Journal, 26(4), 1194-1209.
Cairney, P., McHarg, A., McEwen, N., & Turner, K. (2019). How to conceptualize energy law and policy for an interdisciplinary audience: The case of post-Brexit UK. Energy Policy, 129, 459-466.
Chen, A., & Natcher, D. (2019). Greening Canada’s Arctic food system: Local food procurement strategies for combating food insecurity. Canadian Food Studies, 6(1), 140-154.
de Oliveira, R. A., Lopes, J., & Abreu, M. I. (2021). Insights from a project procurement strategy through an action research. Procedia Computer Science, 181, 1002-1010.
Ghosh, M. (2019). Determinants of green procurement implementation and its impact on firm performance. Journal of Manufacturing Technology Management, 30(2), 462-482.
Grashuis, J., & Franken, J. (2020). Exit strategies of farmer cooperatives in the United States: A competing risks analysis. Journal of Co-operative Organization and Management, 8(2), 100119.
Handfield, R., Jeong, S., & Choi, T. (2019). Emerging procurement technology: Data analytics and cognitive analytics. International Journal of Physical Distribution & Logistics Management, 49(10), 972-1002.
Khojasteh, M. (2021). Multi-objective energy procurement strategy of electricity retail companies based on normalized normal constraint methodology. International Journal of Electrical Power & Energy Systems, 107281.
Kumar, N., & Ganguly, K. K. (2020). External diffusion of B2B e-procurement and firm financial performance: Role of information transparency and supply chain coordination. Journal of Enterprise Information Management, 34(4), 1037-1060.
Latorre, M. C., Olekseyuk, Z., & Yonezawa, H. (2020). Trade and foreign direct investment‐related impacts of Brexit. The World Economy, 43(1), 2-32.
Loosemore, M., & Reid, S. (2019). The social procurement practices of tier-one construction contractors in Australia. Construction Management and Economics, 37(4), 183-200.
Lysons, K. (2020). Procurement and Supply Chain Management. Pearson UK.
Marter, P. (2019). The Keys to Developing an Effective Procurement Strategy. CIPS Knowledge.
Masudin, I., Aprilia, G. D., Nugraha, A., & Restuputri, D. P. (2021). Impact of e-procurement adoption on company performance: Evidence from Indonesian manufacturing industry. Logistics, 5(1),
McHale, J., Speakman, E. M., Hervey, T., & Flear, M. (2021). Health law and policy, devolution and Brexit. Regional Studies, 55(9), 1561-1570.
Rendon, R. G., & Snider, K. F. (2019). Management of Defense Acquisition Projects. American Institute of Aeronautics and Astronautics, Inc.
Woo, D. (2021). Exit strategies in interorganizational collaboration: Setting the stage for re-entry. Communication Research, 48(6), 845-873.
Wuni, I. Y., & Shen, G. Q. (2020). Critical success factors for modular integrated construction projects: A review. Building Research & Information, 48(7), 763-784.