How to build an effective procurement team in 7 steps

If you want to optimize costs and streamline your purchasing processes, you're going to need a great procurement team.

A well-structured procurement team can also act as a strategic partner in managing risks effectively and ensuring compliance.

This post lays out everything you need to know, breaking down the process of building an effective procurement team into seven easy steps.

What does a procurement team do?

A procurement team manages purchasing for an organization, often centralizing that function to lower costs, reduce risk, ensure compliance, negotiate better contracts, and manage supplier relationships.

By doing these things well, a top-notch procurement team can directly affect your organization’s bottom line.

The role and responsibilities of a procurement team

How does a procurement department make such a big difference? These five procurement department responsibilities and roles don't cover everything, but they can at least give you a taste of why procurement professionals matter so much.

1. Centralizing purchasing activities: Instead of 15 different departments making their own purchases using 15 different processes, one team manages all purchases through one efficient procurement process with a consistent purchasing policy. This is especially important for regulated industries, but it can benefit just about any company by bringing more clout to the table to lower costs.
2. Cost savings and cost control: Is there a chance your marketing department just paid for software that your coders already bought? Sending all purchases through one department helps avoid redundancy while increasing your budget control with a standardized approval process.
3. Compliance: Regulations matter. Whether you have to buy the right boards to keep those stairs up to code or buy the right amount of chemicals to stay under a regulated limit, a centralized purchasing team can establish guidelines and controls to keep your organization on the right side of the law.
4. Centralized contract management: Need widgets for your production plants in Ohio, Oregon, and Oklahoma? Instead of buying them separately, raise your leverage — and lower your costs — by consolidating your procurement negotiations and contract compliance management under one team.
5. Risk management: Sometimes, putting all your eggs in one basket isn't such a great idea. It might lower the price you pay for widgets, but if that one big widget supplier goes out of business, well, there go all your widgets. A centralized purchasing team can balance your costs against those kinds of risks, making sure you're optimizing your bottom line while ensuring your ability to stay in business.

Key skills for an effective procurement team

There's no single list of "procurement skills" for procurement professionals or even procurement teams. Effective procurement organizations need a blend of hard and soft skills to navigate the complexities of purchasing. Here's what that looks like.

Hard skills

Your purchasing team needs a solid core of number crunchers. They're responsible for understanding your finances, performing statistical risk analysis, and managing your procurement tech.

Soft skills

Purchasing teams also need a healthy dose of soft-skill gurus. These folks will be responsible for communicating with your internal teams, negotiating contracts, and managing supplier relationships.

Procurement team structure

Once you start breaking down the skills needed in a purchasing department, it's easy to see that different kinds of people will fill various roles. That's why many purchasing teams are broken down into smaller segments, each of which is responsible for more specialized roles and responsibilities.

Here's an example of a typical procurement department structure:

• Data analytics and reporting: Analyzes data, including financial statements, to provide insights to the procurement team as they're making decisions.
• Strategic sourcing: Focuses on long-term supplier relationships and strategies, such as structuring their supplier mix to optimize the balance between lowering costs and reducing the risk of supply-chain disruptions.
• Contract management: Once supplier contracts are in place, this part of the procurement team manages those contracts and ensures compliance on both sides of the relationship.
• Purchasing: Handles day-to-day purchasing activities to make sure every location gets what it needs on time and that orders are properly inventoried, inspected, and approved before invoices get paid.

How to build an effective procurement team

When you're ready to build your procurement team, here's how to do it in seven easy steps.

1. Define procurement objectives

Start by taking stock of your organization's overall objectives so you can make sure your procurement team is on board. These might include improving efficiency, reducing costs, mitigating risks, or all of the above.

With your procurement objectives in place, you can then set key performance indicators (KPIs) to help measure the team's progress and success in meeting these goals.

2. Identify key stakeholders

When it comes to purchasing, just about everyone can be a stakeholder—from senior management to the people on the front line who will work every day with the products or services you're procuring.

Start by identifying people at every level of the organization who will rely heavily on the purchasing team, especially those whose jobs will be directly affected by the choices your purchasing team makes.

3. Foster stakeholder engagement

Once you've identified your internal stakeholders, meet with them to learn what they care about when it comes to procurement and what they need to do their jobs effectively. Be sure to meet with stakeholders at different levels of the organization across different roles and departments to get a clear, representative picture of your organization's needs.

This kind of collaboration helps the procurement team make better decisions for the organization as a whole while also helping stakeholders at every level feel included in the process. That, in turn, will make your employees more willing to share their perspectives and more likely to accept the support of your centralized procurement team.

4. Assess required skills

Think about how you want to structure your procurement team and identify the hard and soft skills each member of the team will need.

Who will negotiate your contracts? Who's going to analyze data to make sure your negotiator is fully informed? Who's going to think strategically about costs and risks?

Procurement teams need:

• Negotiation skills
• People to oversee contract management procedures and contract compliance
• Procurement professionals to monitor supplier performance and streamline operations
• Team members to manage the procurement organization itself and its procurement processes (like chief procurement officers)

By matching the right skills with the right positions, you'll know you have the right team in place to work toward a better bottom line with healthier business practices.

5. Develop a recruitment strategy

With your desired skillset in place for each position, your recruitment team and procurement manager leads can focus on finding the people you need. Maybe your key negotiator needs to be a seasoned veteran. Maybe your data analysts need a background in risk management.

The more clearly you can define the people you're looking for, the more strategic your recruitment team can be in how and where to find them.

6. Measure performance

As your procurement team comes together, establish metrics with them to evaluate supplier performance as well as their own performance as a procurement department — just be careful not to think too narrowly. People tend to focus on the metrics that matter most to their job evaluations. If you focus on costs without emphasizing the importance of quality, your brand can ultimately suffer.

Think strategically about your KPIs to make sure your procurement team will be aligned with your organization, including overarching guidelines like your company's mission and values.

7. Implement technology solutions

No twenty-first-century procurement team would be complete without a modern procurement tech stack to manage the procurement process flow and supply chain management.

From data analytics to three-way PO matching, your team will need digital platforms that can automate manual tasks, support your organization's financial needs and goals, and build strong supplier relationships.

What technology does your procurement team need?

When you think about what a procurement team does, the technology that it needs is fairly straightforward.

Your procurement team needs to be able to:

• Analyze and report on KPIs like cost savings
• Manage contracts and supplier performance
• Maintain good relationships with those suppliers
• While also making sure your suppliers are complying with their contractual obligations

BILL Accounts Payable helps you do all that and more:

• Track and manage all your bill pay in one place, with the efficiency of automation
• Get unlimited storage space for supplier contracts and other info
• Improve the speed and visibility of invoice approvals and vendor payments
• Leverage AI for controls like 3-way matching to make sure your suppliers are meeting their obligations

Plus, your finance team gets to save time on AP while increasing your financial control and security. Learn more about BILL Accounts Payable.

What our customers have to say

“Whereas before we had to do everything manually with billing, thanks to BILL’s three-way matching capability for NetSuite, the entry part has been almost eliminated. Paying bills is so easy—just review and approve. It’s been pretty refreshing. The new three-way matching capability has reduced our time spent on AP by up to 75%.” — Courtney Smith, Accounting Manager, aboutGOLF

“With BILL, I can just look at the invoice, quickly verify that it’s the right vendor and the right amount, check the box, and move on. The whole process takes me just 15 minutes a week.” — Kevin Cullinan, Corporate Controller and Director of Finance, Myomo

Procurement team FAQs

Have questions about procurement teams? We've got answers.

Who are the members of the procurement team?

A procurement team is often broken out into four distinct functions:

• Data analytics and reporting
• Strategic sourcing
• Contract management
• Purchasing

Each of these functional units will include a number of individuals depending on the size of the organization. Data analytics might include directors, managers, and analysts. Contract management might include lawyers as well as vendor relations managers. Large organizations might even have a chief procurement officer representing your procurement managers in the company's C-suite.