Procurement is a critical function for engineering and construction (E&C) companies. It involves the acquisition of goods and services necessary to complete projects on time and within budget. Procurement can account for up to 70% of the total cost of an E&C project, so it is essential that it is aligned with the company’s overall strategy.

Benefits of Aligning Procurement with Strategy

A well-aligned procurement strategy can help E&C companies to:

• Improve efficiency and reduce costs: By streamlining procurement processes, E&C companies can reduce the time and resources spent on procurement. Additionally, by negotiating better prices with suppliers, E&C companies can reduce the cost of goods and services.
  • Implement electronic procurement systems to automate procurement tasks and reduce manual data entry.
  • Centralize procurement activities to improve coordination and visibility.
  • Develop and implement a vendor management program to improve supplier performance and negotiate better prices.
  • Use data and analytics to identify opportunities to reduce costs.
• Win more bids: By having a clear understanding of their procurement needs, E&C companies can develop more competitive bids. Additionally, by having a strong track record of on-time and on-budget project delivery, E&C companies can become more attractive to potential clients.
  • Develop a clear understanding of customer requirements and procurement needs.
  • Develop a competitive bidding strategy.
  • Work closely with project teams to ensure that bids are aligned with project requirements and budgets.
  • Track bid performance and identify areas for improvement.

• Manage risk: By diversifying their supply chain and by having contingency plans in place, E&C companies can reduce the risk of disruptions to their procurement process.
  • Diversify the supply chain to reduce reliance on a single supplier.
  • Conduct due diligence on suppliers to assess their financial stability and performance.
  • Develop contingency plans to mitigate the impact of disruptions to the supply chain.
  • Obtain insurance to protect against financial losses.
• Enhance compliance: By having a clear procurement policy and procedure in place, E&C companies can ensure that their procurement activities are compliant with all applicable laws and regulations.
  • Develop a clear and comprehensive procurement policy and procedure.
  • Provide training to employees on the procurement policy and procedure.
  • Implement a system for auditing and monitoring procurement activities.
  • Establish a process for reporting and investigating procurement irregularities.
• Build stronger relationships with suppliers: By working collaboratively with their suppliers, E&C companies can build stronger relationships that can benefit both parties. For example, E&C companies can work with their suppliers to develop new products and services, or to improve the quality and efficiency of existing products and services.
  • Develop a strategic supplier management program.
  • Work with suppliers to develop new products and services.
  • Improve the quality and efficiency of existing products and services.
  • Share information and best practices with suppliers.
  • Pay suppliers on time and in full.

Challenges to Aligning Procurement with Strategy

E&C companies face a number of challenges in aligning procurement with strategy. These challenges include:

• The complexity of the E&C industry: The E&C industry is a complex and fragmented industry, with a wide range of stakeholders involved in each project. This complexity can make it difficult to coordinate procurement activities and to ensure that they are aligned with the company’s overall strategy.
• Short project lifecycles: E&C projects often have short life cycles, which can make it difficult to plan and execute procurement activities effectively.
• Global supply chains: Many E&C companies have global supply chains, which can add complexity and risk to the procurement process.

Strategies for Aligning Procurement with Strategy

E&C companies can use a number of strategies to align procurement with strategy, including:

• Developing a clear and concise procurement strategy: The procurement strategy should be aligned with the company’s overall business strategy. It should clearly define the company’s procurement goals and objectives, as well as the strategies that will be used to achieve them.
• Establishing a procurement governance structure: The procurement governance structure should define the roles and responsibilities of key stakeholders involved in the procurement process. It should also establish a process for making procurement decisions.
• Implementing a procurement management system: A procurement management system can help E&C companies to automate and streamline procurement processes. It can also provide visibility and control over procurement activities.
• Investing in supplier relationship management (SRM): SRM can help E&C companies to build stronger relationships with their suppliers. This can lead to improved communication, collaboration, and innovation.
• Using data and analytics: E&C companies can use data and analytics to improve their procurement decision-making. For example, they can use data to identify trends in supplier performance, to benchmark prices, and to forecast demand.

Additional Tips for Aligning Procurement with Strategy

Here are some additional tips for aligning procurement with strategy:

• Involve key stakeholders in the development and implementation of the procurement strategy. This will help to ensure that the strategy is aligned with the needs of all stakeholders, including the business, project teams, and suppliers.
• Communicate the procurement strategy to all employees. This will help everyone to understand how procurement is aligned with the company’s overall strategy and how they can contribute to achieving the company’s procurement goals.
• Monitor and review the procurement strategy on a regular basis. This will help to ensure that the strategy is still aligned with the company’s overall strategy and that it is effective in achieving the company’s procurement goals.

Engineering and construction (E&C) companies can achieve significant business growth by aligning their procurement strategy with their overall business strategy. By following the strategies outlined in this article, E&C companies can improve their procurement performance and achieve their business goals.