Six Steps to Developing a Procurement Strategy that Works

Fleet procurement is a critical aspect of modern business operations, and it involves the acquisition of vehicles and equipment necessary for running a fleet. A successful fleet procurement strategy can help businesses streamline their operations, reduce costs, improve safety, and enhance overall performance. However, without proper planning and execution, fleet procurement can be a daunting task that drains resources.

In this article from Fuelmate, we will provide you with a step-by-step guide to successful fleet procurement, so your business can create an effective strategy for acquiring and managing your fleet assets.

  • What is a successful fleet procurement strategy?
  • Effective procurement planning
  • Strategic sourcing for procurement and fleet management
  • Advantages of effective procurement
  • Should we go electric?
  • Conclusion
  • Other useful guides
Procurement Solutions

What is a successful fleet procurement strategy?

When it comes to successful fleet procurement, there are three areas where strategy and methodical planning must be implemented in order to manage the department effectively.

In order to achieve this, procurement solutions, including the use of resources like fuel cards, need to be implemented within:

  • Initial procurement planning
  • Department efficiency
  • Management of relationships internally and externally

Each of these key areas are instrumental when it comes to developing a system within a fleet procurement team. Whether you have a large or small fleet within your company, the stages in this guide remain the same. It’s also important to remember that these areas can easily be scaled on a large corporate level, or work within a team of two.

And, just like anything else worth having, successful fleet procurement and fleet management takes time. By following this step to step guide, you can hit the ground running to make fleet management operations be as cost-effective as possible.

Procurement and Fleet Management

Effective Fleet Procurement Planning

The first stage of any procurement process is planning, and this is the first place you need to implement an effective strategy. Planning is important so you can organise and guide your team for the coming year, or time you wish to plan for. The planning process is essential for deciding what is to be purchased, at what time and where from.

Developing a procurement plan can sometimes be a long process, depending on how large your fleet procurement department and the number of different products you require. Procurement plans are also subject to change, depending on finance adjustments and if any changes should occur within the business during the time period planned for. Nevertheless, if an effective plan is created at the start it is the best way to lead the direction of the team, even if a few extra products or measures are added or taken away during that period.

So, what needs to be considered during the procurement planning process?

1. Budget

Without a clear outline of the budget that is needed for fleet management operations to run successfully, including every stage within the procurement process, your fleet procurement plan can't be successful. Locking down your budget across the whole department is arguably the most important part of the planning process, as it dictates every other step along the way.

2. Time

An accurate representation of time across your plan is an important consideration to ensure items are secured at the current time. For example, if your fleet is involved in the distribution of fire logs and wood, your busiest period is likely to be winter which is when you may take on more fleet drivers. Therefore that is the time that you will need to order more fuel cards to accommodate the extra members of staff. By ordering them at the correct time, it ensures all fuel is still able to be purchased at a lower rate.

3. Products

A complete procurement plan involves identifying necessary products and sourcing suppliers, which is a separate ongoing process. Your fleet's specific requirements and budget, along with product demand timing, help determine the suitable supplier for each item. Having established budget and time, you can assess if one contract can fulfill multiple needs or if they should be split among various suppliers.

4. Resources

Sometimes new projects require extra resource, and by planning your budget, time and what products are needed, you can decide whether you can cope with the requirements of the plan based on the resources you already have. Or, whether extra help is needed and when, if you only need help during peak periods.

Strategic Sourcing for Procurement and Fleet Management - 7 Step Process

Strategic sourcing is able to happen as a result of the planning process and can be extremely effective when procuring items within your desired budget.

The strategic sourcing process is usually a full 7 step process which is seen as an essential layer of effective planning, particularly for a regularly changing price market such as fuel.

Step 1. Understand your internal requirements

The first step within strategic sourcing includes understanding your organisation's current needs and strategy and then comparing this to how your procurement process is currently operating. Be sure to consider areas within your current budget where you believe costs can be reduced. This stage is great for improving your procurement departments efficiency but also allows for reflection on areas within your budget where you can reduce or cut costs completely.

Step 2. Analyse the supplier market

In the strategic sourcing plan, ensure you obtain the best value for money in various areas such as goods, services, raw materials, drivers, transport, and fuel costs. Analysing the supplier market helps achieve an effective budget and maximise procurement efficiency. To streamline costs, fuel cards are a recommended solution for fleets, reducing expenses, saving time, and aligning with your budget.

Step 3. Gather potential supplier details

After supplier analysis, create a portfolio of viable suppliers to mitigate supply chain risks. Gather information on more suppliers than needed to address potential issues. If the chosen supplier fails, revisit the portfolio to evaluate alternative options. Note important details in the portfolio, such as market competitiveness, supplier reputation, business performance, turnaround time, and references.

Step 4. Create a strategic sourcing strategy

Now you can decide on the type of sourcing or outsourcing strategy that will work best for your organisation. When doing so, consider the aims and objectives of your organisation and which sourcing strategy has a past history of being successful within your market. From developing the sourcing strategy, you will get the full picture of the specifications of the goods and services, a breakdown of all involved costs between you and the supplier, as well as the expected delivery time.

Step 5. Negotiation with suppliers

With the relevant information in hand, compare suppliers based on your organization's requirements. Engage the procurement department in open discussions to deliberate the final shortlist, considering all opinions on supplier opportunities and concerns. Carefully consider available options within your budget. After negotiations, select the final supplier and seek approval from relevant departments. Strategic sourcing builds a trustworthy relationship, allowing minor outsourcing tasks like inventory management, saving time and enhancing your strategic sourcing strategy.

Step 6. Implement the strategic sourcing plan

Having informed the successful supplier or suppliers that they have gained a contract, it's time to implement the strategic sourcing plan. You're now turning the strategy previously developed in step 4 into actions. This step involves starting the process of changing from the current supplier to the newly selected supplier, transferring information over and ensuring that there is an ongoing and transparent communication between the procurement department and the chosen supplier.

Step 7. Measure the supplier's performance

Measure supplier performance once the supply chain is established, focusing on key performance indicators and alignment with requirements. Communicate with other departments to gather feedback on the supplier. Maintain open communication between the procurement team and the supplier to address areas for improvement. Treat strategic sourcing as a cycle, repeating the process to assess changes in the supplier market and find better, cost-effective options. Time investment in the process mitigates risks and benefits long-term business success.

Fleet Management Trends

What are the advantages of an effective procurement strategy?

Here are some of the potential advantages that come with an effect procurement strategy:

1. Cost Reduction

Procurement planning offers appreciated cost reduction through strategic sourcing and supplier selection. Negotiating prices and reducing costs is easier when not constrained by tight deadlines. With ample planning time, comparing quotes and market rates empowers you to make informed decisions. Acting under time constraints puts you at a disadvantage, while the planning phase grants an advantageous position to secure favorable prices.

Tip: Be sure to check- in with other departments during the planning process. Simple tasks like asking them to perform a stock-take on office supplies could help you dedicate spend and reduce projected costs more effectively during the planning stage.

2. Extra Resourcing

Effective procurement planning encompasses all necessary aspects for smooth operations. Identify periods or projects requiring additional resources and incorporate them into the budget. For fleet procurement or haulage, anticipate peak periods and plan for extra vehicles and fuel cards. This advance notice enables fuel card providers to deliver and distribute cards in time, saving valuable time and money. Find out more about fuel cards and the benefits they can have for businesses.

Tip: The most beneficial fuel card for your business can be calculated based on your drivers' habits and their location coverage via a fuel card comparison tool. This is the best way to select efficient fuel cards and to see if your current cards need to be updated based on any changes within your business.

3. Transparency

As the plan is created for all to see and be aware of, it creates complete transparency within the procurement process. Should, for any reason, anything go wrong, it is an easy base point for everyone to go back to and develop a solution from. Furthermore, if anything should go wrong, with a plan in place nothing else should be affected as a clear pathway for the procurement of all items is clear, and does not need to have a ripple effect across the board.

Tip: Remember, a plan isn't set in stone and some level of flexibility needs to be given for changes that could happen beyond your control. Even though you've planned which suppliers you'll be using, ongoing market research should be undertaken throughout the year. Based on this research, you should be prepared to amend your plan to reflect any supplier changes or product cost reductions that can be negotiated.

4. Planning Vs Performance

Procurement planning serves as a performance measurement tool throughout the process. It helps analyse deviations from targets and identifies necessary plan adjustments. Managers can utilise the plan for appraisals and provide constructive feedback. Monitoring performance against the plan facilitates identifying areas needing improvement and making adjustments accordingly.

Tip: Make sure any changes to your plan are logged accurately, with a note explaining the reason for the amends, with the correct dates to match the actions. 100% accuracy is needed to track performance data correctly so you can re-use and refer to this data.

5. Future Strategy Development

Effective procurement planning serves not only as a real-time performance measurement tool but also aids in developing and refining procurement strategies for future projects. Analysing measured performance helps identify effective methods and areas for further development. Real data-driven insights inform the creation of an effective procurement strategy based on past successes.

Tip: When developing a strategy, try to also refer to your predecessors' procurement plans where possible. There may be patterns and methods that correlate or can be merged with the current plans to optimise the strategy.

The advantages of procurement planning affect the upcoming actions of the department as well as those in the near and far future, making planning an essential part of the procurement process. Planning is just one part of the puzzle in order to achieve successful procurement.

filling up white car wih fuel

Should we go electric to save costs?

When moving your fleet to electric and hybrid vehicles, make sure you have time to manage a considered and careful transition.

The best way to approach this change would be to assess your current fleet and see if there are any vehicles that are costing you more in repairs then they are perhaps worth. If you source your vehicles through a provider or vehicle management service, get in touch with your account manager to discuss the range of more sustainable models available that would suit your fleets needs moving forwards.

There will be a stage of trial and error when it comes to finding out which electric or hybrid vehicles are right for you and your fleet, but you’ll find that, in the long run, the transition is worth it both financially and logistically.

You will also need to plan how your drivers will charge their vehicles. Previously, fleet managers have been hesitant to switch to EVs due to the lower amount of charge points compared to fuel stations. However, between 2019 and 2023, the number of EV models available has been predicted to double and the rollout of charge points is constantly increasing the ability to charge vehicles on the go. The ever-increasing amount of charge points across the country will help fleets during the transition away from petrol and diesel in the coming years.

If on the road, you’ll find that fuel cards are, of course, still available for electric vehicles. Our Chargemate fuel card offers access to the expanding network of charge points whilst still giving you access to the comprehensive fleet services we provide.

Successful Fleet Procurement: Conclusion

In conclusion, successful fleet procurement requires careful planning, thorough research, and effective communication. By following the step-by-step guide provided in this article, organisations can streamline their procurement process and ensure they acquire the best vehicles at the most competitive prices.

Fleet managers should prioritise establishing clear procurement policies, identifying key stakeholders, exploring financing options, and evaluating suppliers to make informed purchasing decisions. Finally, ongoing monitoring and analysis of fleet performance will enable organisations to optimise their investments over time.

With a strategic approach to fleet procurement, organisations can build a reliable and efficient transportation operation that delivers long-term value.

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