15 Essential Procurement Skills You Need in 2024 (2024)

What Are Procurement Skills?

Procurement skills are the abilities that purchasing managers or procurement specialists use to guide purchasing decisions within an organization. These abilities include everything a procurement professional needs to find the most appropriate equipment or materials at the best price margin.

Why Are Procurement Skills Important?

Procurement skills are vital for the functioning of a department or business. These skills enable quick decision-making, such as replacing malfunctioning equipment to maintain activity, or recognizing opportunities to increase production and promoting overall organizational competitiveness and success.

In this article, we will learn 15 procurement skills essential to succeed as a procurement professional. Continue reading and find out what skills you have and what skills you need to work on.

15 Essential Skills for Effective Procurement

Upskill and stay relevant with these procurement skills:

1. Negotiation

Negotiation is at the core of product/service sourcing. Successful negotiation is all about finding ways to reach mutually beneficial agreements with your suppliers. This requires effective listening and asking the right questions to ensure everyone is on the same page. To understand this better, you should read our recently published article, the nine key steps on how to effectively listen and ask the right questions during negotiation to ensure successful outcomes.

Stages of Negotiation in Procurement

1. Preparation:

You can only win in negotiation if you are prepared. Preparation involves getting to know the other negotiating parties, familiarizing their standard and principles, and how you can build a positive relationship with them. You must also know your values, needs, and bargaining style to establish your standards.

2. Exchange of Information:

Henry Ford once said, “If there is any one secret of success, it lies in the ability to get the other person’s point of view and see things from that person’s angle as well as from your own.” Active listening to the other party’s information is equally important as conveying what you want from the negotiation.

3. Bargaining:

After the exchange of information, both parties will have a better understanding of each other’s needs and concerns. This results in an open discussion to create an opportunity for both parties to acquire as much value as possible from the negotiation.

4. Closure:

This is where commitment to the deal is secured. Both parties agree and conclude the procurement negotiation by signing contracts or transferring funds in escrow.

2. Communication

Communication is one of the top procurement skills required in building relationships with vendors and other stakeholders. Indeed, if you lack excellent communication skills, misunderstandings can quickly come up between briefs and bidding; you will struggle to close deals, get better offers, or collaborate with stakeholders. Good communication skills can help you determine the best way to connect with vendors and other stakeholders.

Communication Methods in Procurement

1. Verbal:

Be confident when speaking and avoid filler words.

2. Nonverbal:

Your body movements, gestures, and facial expressions convey a message. Be conscious of what you are physically displaying.

3. Written:

Keep it simple and direct. Remember to review your written letter.

4. Listening:

It’s important to note that active listening is part of communication. Try to listen to your supplier’s concerns and priorities; ultimately, it enables you to tailor solutions that align with both parties’ interests.

3. Market Research

A successful sourcing manager’s arsenal of procurement skills will be useless if it’s missing “market research.” You can only source high-quality products if you know how to conduct effective market research. Simply put, market research is discovering your company’s best suppliers and products.

A skilled procurement professional analyzes all the data gathered during the research and determines opportunities and how they can help the company save on costs with the best values. Data collected through market research can also help companies negotiate terms and conditions and understand how to address primary stakeholders’ priorities. This is also a helpful procurement skill for finding the best match suppliers for your organization.

Tips on Effective Supplier Market Research

1. Set goals and criteria:

Make sure to clearly understand what you want to achieve. Have a set of business objectives and criteria to guide you to focus on relevant options.

2. Explore different sources and methods:

There are a lot of sources and methods for data collection; online databases, conferences, trade shows, etc. Find the best method that works for you to get valuable insights into best practices in the industry and find potential suppliers.

3. Evaluate and Compare:

It’s time to narrow down your options by comparing all the potential suppliers based on your organization’s criteria. You can use tools and techniques to do this; one effective technique is SWOT analysis. Identify each supplier’s strengths, weaknesses, opportunities, and threats to find one that best matches your organization’s needs.

4. Procurement Analytics

We have published an article about the 8 Things Every Procurement Manager Should Track, where we discuss the importance of procurement analytics. Knowing how to examine and interpret procurement-related data will help you gain insights and make informed decisions.

As a procurement professional, your procurement skills should include collecting, organizing, and analyzing information. Your duty includes analyzing the results of procurement performance, suppliers’ behavior, and other vital factors that impact the procurement process.

Important Procurement Metrics to Track

1. Key Figures (cost of goods, volume, etc.):

This metric includes the cost of goods sold (COGS), not limited to just the purchase price but includes transaction fees, warehousing, and other incidental expenses. While volume is the total amount of pieces that you are buying.

2. Spend Under Management:

The total amount spent is actively managed by the procurement manager.

3. Value Chain Analysis:

This concept describes the full chain of business activities in creating a product/service.

4. Cost Price Breakdown:

The process of identifying individual elements that comprise the total cost of your bought goods/services.

5. Number of Suppliers:

This metric determines the number of suppliers in the organization or specific category.

6. Cost Savings:

This is measured by the cumulative amount of savings gained.

7. Payment terms:

Average payment terms measure the average time (in days) invoices are paid by, calculated using every single instance of payment term information.

8. Contract Coverage:

This measures the amount of spend covered by a contract.

9. Exchange Rate:

Necessary only if you buy and sell goods/services outside your country.

10. Supplier Rating:

This measures suppliers’ performance in handling deliveries, quality issues, errors, and claims.

5. Risk Management

Good procurement professionals know how to assess, evaluate, and manage risks associated with the procurement process. This includes understanding the risks that can be encountered, such as compliance, supply chain interruption, supplier failure, or fraud.

Common Procurement Risks

1. Inaccurate Needs Assessment:

Failing to identify organization requirements accurately leads to poor decisions.

2. Vendor Selection Issues:

The inability to accurately evaluate suppliers can result in lower-quality products or services.

3. Vendor Management Challenges:

Insufficient oversight of suppliers can hinder collaboration and cost-saving opportunities.

4. Non-Compliance and Contract Management:

Inefficient contract processes and non-compliance with regulations can lead to legal and financial issues.

5. Manual Processing Risks:

Relying on manual processes increases the chances of errors and inefficiencies.

6. Supply Chain Disruptions:

Unexpected events can disrupt the supply chain, resulting in procurement problems.

6. Financial Management

There will be a lot of computations when negotiating deals and engaging with suppliers. This is why having financial acumen is one of the essential procurement skills for making informed decisions. You will get the best value for your company if you have an in-depth understanding of financial metrics and cost analysis.

Financial Methods Relevant to Procurement

1. Cost Analysis:

Understanding the total cost of what you’re buying, including things like maintenance and disposal costs.

2. Pricing Strategies:

Knowing how to negotiate prices with suppliers according to budget and value needs.

3. Budgeting:

Planning where to spend money on procurement activities to stay within your approved budget.

4. Cash Flow Management:

Keeping track of the money coming in and going out for procurement.

7. Sustainability and Ethical Sourcing

Prioritizing environmental and social responsibility is a growing trend in procurement. Thus, knowing how to incorporate sustainable and ethical practices in your decision-making processes is becoming increasingly important. Work with suppliers who demonstrate a commitment to social responsibility and diversity in their workforce.

Consider procuring products that are environmentally friendly and energy-efficient. There are a lot of resources you can find to help you reduce your organization’s ecological footprint. Check out our ultimate guide to sustainable procurement to get an in-depth understanding of what sustainability in the procurement process truly means in 2024.

4 Goals of Sustainable Procurement

1. Reduce the impacts of goods or services across their life cycle and through the supply chain.

2. Decrease the demand for non-renewable resources.

3. Guarantee fair contract prices and terms are respected and applied.

4. Promote equality and diversity throughout the supply chain.

8. Problem-Solving

Being a procurement professional means dealing with challenges and problems almost daily. Thus, “problem-solving” is one of the core procurement skills that make up an efficient procurement professional.

You must know how to use data-driven approaches, think creatively, and quickly develop workable solutions to provide your organization’s best solutions.

Steps in a Problem-solving Process

1. Identify the problem and its root cause.

2. Define what goals you want to achieve by solving the problem.

3. Explore all potential solutions.

4. Find the best solution and implement it.

5. Evaluate the outcome and revise the action plan as needed.

9. Networking

Having the skill to build relationships with suppliers and stakeholders is crucial for success in procurement. You have to stay updated and informed about industry trends and developments; networking is a great way to achieve that. Attend events and conferences to stay connected with other procurement professionals.

Different Types of Conventions for Procurement Networking

1. Industry-specific Conventions:

A convention that focuses specifically on the procurement industry: trends and updates in the field.

2. Trade Shows:

These conventions aim to introduce products and services in a specific sector.

3. Vendor-centric Events:

Hosted by suppliers, this convention provides valuable information regarding suppliers’ capabilities and supply chain operations.

4. Academic Conferences:

A gathering of experts and professionals in the industry to share insights on academic research and findings.

10. Adaptability

Things can change quickly in the procurement world. You must be able to adapt to new trends and unpredictable situations quickly. This could mean adjusting purchasing decisions to match the changing needs of your organization.

How To Demonstrate Adaptability as a Procurement Professional

1. Embrace Change:

Be open to new ideas, methodologies, and technologies within the procurement field. Embrace change positively and show your willingness to learn and adapt.

2. Flexible Problem-Solving:

Approach challenges with a flexible mindset. Instead of sticking to one solution, explore various approaches and adapt your strategy based on the evolving situation.

3. Effective Communication:

Communicate openly with stakeholders and suppliers whenever there are changes or adjustments that need to be made and ensure everyone is on the same page.

4. Scenario Planning:

Prepare for different scenarios in advance. Anticipate potential challenges and outline strategies to adapt if things don’t go as planned.

11. Knowledge of Technology

Technology has revolutionized the way procurement works, and you must stay in tune with technological developments to grow in this industry. Familiarize yourself with new tools, software programs, and eProcurement platforms that can help streamline your processes, such as supplier management, budgeting, and inventory control.

Popular Procurement Software

1. SAP Ariba:

This cloud-based platform offers sourcing, contract management, and supplier relationship management tools.

2. Coupa:

This platform provides services for supplier management, spend analytics and legal reviews.

3. Oracle Procurement Cloud:

This cloud-based platform offers integrated spend management, supplier management, and strategic sourcing services.

4. JAGGAER:

This platform provides strategic sourcing, supplier management, and contract compliance services.

5. GEP SMART:

This cloud-based platform offers comprehensive services for strategic sourcing, contract management, and spend analytics.

7. Precoro:

Precoro streamlines procurement processes through seamless document approval via email or Slack, efficient budget management, simplified purchase orders, and secure integrations with ERPs and business tools.

8. Zycus:

This cloud-based platform provides strategic e-sourcing, financial savings management, contract management, and supplier relationship management services.

12. Decision-Making

When you have to make the right choices daily, “decision-making” skill becomes inherent. A skilled procurement professional understands how to make decisions with the organization’s best interest in mind. There are many things to consider and data to analyze to help you make valuable decisions. Having this skill is crucial as your choices will determine the overall outcome of the procurement processes.

Important Considerations During Decision-Making

1. Objectives:

The decision should align with your overall goals and objectives.

2. Data:

Your decisions should be based on accurate data.

3. Stakeholders:

Consider the impact on all stakeholders involved.

4. Risks:

Evaluate potential risks and their potential consequences.

5. Costs:

Factor in both the direct and indirect costs of your decision.

6. Benefits:

Assess the benefits and value your decision will bring.

7. Timelines:

Consider the timeframe for implementing the decision.

8. Alternatives:

Evaluate different options before making a choice.

9. Long-Term Impact:

Think about how the decision will affect the future.

10. Ethics:

Make sure your decision aligns with ethical standards.

13. Strategic Sourcing

This skill involves identifying potential suppliers, negotiating contracts, and managing supplier relationships to guarantee the best possible outcomes in procurement. A procurement professional skilled in strategic sourcing can find the best suppliers who can give the best deals and results for their organization.

7-Step Strategic Sourcing Process

1. Assess Your Needs:

Evaluate your organization’s procurement needs and current practices. Identify what areas can be improved and set clear goals for the sourcing process.

2. Research and Identify Suppliers:

Research the market to determine potential suppliers who align with your requirements.

3. Evaluate and Select Suppliers:

Shortlist and select suppliers based on quality, cost, reliability, sustainability, and your organization’s needs.

4. Negotiate:

Negotiate to get favorable terms, pricing, and contractual agreements.

5. Implementation:

Execute the plan by working closely with selected suppliers to ensure smooth processes.

6. Performance Monitoring and Management:

Continuously monitor supplier performance and promptly address issues.

7. Supplier Relationship Management:

Build long-term supplier relationships by keeping communication lines open and providing feedback.

14. Vendor Evaluation

Vendor evaluation skill is vital in strategic supplier selections. By assessing supplier performance and capabilities and how they align with your organization’s goals, you can ensure reliable and quality products/services.

Benefits of Vendor Evaluation in Procurement

1. Mitigates risks

2. Optimizes costs

3. Builds positive supplier relationships

4. Enhances procurement effectiveness

5. Contributes to growth and stability

15. Continuous Learning

Staying updated with industry trends, best practices, and new technologies in procurement is necessary if you want to remain relevant in the industry. The desire to expand your knowledge and grow in this career continuously is one of the best traits or procurement skills you can invest in.

The Keys to Successful Continuous Learning

1. Trust the process:

Take it one step at a time. A learning plan will help you optimize your time, effort, and resources.

2. Ask questions:

Be true to yourself. Don’t pretend to know everything. Don’t be afraid to ask questions if you do not know a particular subject.

3. Find a mentor:

The best way to learn something is to ask the experts in that field. They will be able to answer all your questions and give you better insights.

4. Take time to evaluate yourself:

Evaluate the outcomes of your previous actions and decisions. Reflect on how you can improve your skills based on those insights.