Procurement is crucial for your business.

That we all know 

However, buying only for the sake of pricing can only be beneficial in the short term.

The more your business grows, the more your operations scale and you start building a name in the market, you need to focus on additional factors when dealing with suppliers.

You need to prioritize value over solely cost 

But how?

What's the right approach?

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Well, implementing a value-based procurement strategy is a good place to start.

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What's Value-Based Procurement?

Have you ever asked yourself how you can improve the success of your procurement processes?

Pricing is important for sure, but with a fluctuating market and consumers oriented to social and environmental values, there are other things to care about.

Value-based procurement shifts the focus from simply getting the lowest price available to really maximizing value. It considers aspects like quality, long-term benefits, sustainability, and reliability.

Following this sort of procurement means that you are considering the total cost of ownership (TCO) plus its complete impact on your operations. 

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Key Principles of Value-Based Procurement.

Focus on TCO 

A lower upfront price is good to look at, and yet…

It's not the end of the tale.

Especially for procurement, where you have so many priorities and responsibilities, making it essential to consider the full lifecycle cost, including maintenance, operational expenses, and potential risks.

For example,  you could find a competitive price in a potential supplier that doesn't meet any ESG standard, putting the reputation of your company at risk.

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Prioritize quality and performance 

This is must have 

When searching for products and are in the sometimes tedious process of finding a new supplier, you need to pay attention to how well they meet your business needs. Consider high-quality as one of those things that can rarely if ever be sacrificed 

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Build strong relationships

This is often one of the most important reasons behind a successful business.

Strong partnerships with suppliers.

Work with those who bring innovation, reliability and are open to growing alongside your company.

Sustainability 

Check any procurement trend for this and the upcoming years and you'll find sustainability somewhere in the first places of the list.

Choosing eco-friendly, responsibly sourced materials and people who care about the same values protects your business and gives your public image a boost in front of your competitors.

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Data, lots of data 

So yes, value-based procurement is all about making the right choices and working with a bigger picture in mind. 

The best way to do that?

Trust your procurement analytics to compare supplier performance, track spending trends and identify opportunities for optimization. 

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Check your business’s goals

Here's the thing, procurement relies heavily on your company's objectives. 

So yes, your procurement decisions should support broader business goals like innovation, operational efficiency, or market expansion.

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How Value-Based Procurement Differs from Traditional Procurement?

Focus 

Traditional procurement tends to seek the lowest price. 

Value-based procurement focuses on assessing the total value and creating long-term benefits.

Decision

Traditional procurement works mostly around the best pricing.  Value-based procurement is more about finding a balance between quality, pricing, efficiency and overall performance 

Suppliers

Building positive relationships is more common in value-based procurement than in traditional procurement.

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Benefits of Value-Based Procurement

While cost savings are always a priority, focusing solely on price can lead to hidden expenses, lower quality, and missed opportunities for innovation. Here’s why prioritizing value is the right move for your business.

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Higher quality outcomes

Do you want to stay strong and make a great impression in your industry? Focus on the quality of your products. 

Purchasing decisions based on quality, performance, and long-term impact lead to better business outcomes. High-quality products and services reduce the risk of defects, inefficiencies, and downtime. Removing the negative change of having to deal  with recurring replacements or maintenance issues.

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It’s cost-efficient

Depending on how you look at it, a lower price may seem like a win, but it often comes with hidden costs like frequent repairs, higher energy consumption, shorter lifespan, and inefficiencies. If you learn to integrate the whole TCO, your business can avoid unexpected expenses and make investments that save money over time.

Better supplier relationships

Reliable suppliers are key to your business success. 

And this is what makes prioritizing value so great.

You are truly giving you the opportunity to develop productive and friendly partnerships with your suppliers. 

Suppliers that align with your business goals can offer better service, customization, and innovation. They are also more likely to provide proactive solutions, so you can guarantee a supply chain free of disruptions. 

Sustainability and compliance

With a growing emphasis on environmental and social responsibility, businesses need to ensure their procurement decisions align with sustainability goals. Value-based procurement helps you:

• Choose suppliers committed to ethical sourcing and responsible production.
• Reduce waste and improve energy efficiency.
• Stay compliant with industry regulations and avoid reputational risks.

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Measuring Success of Value-Based Procurement 

To see if your procurement strategy is working, track these key performance indicators:

• Supplier Performance Metrics: Quality, reliability, and fulfillment rates.
• Total Cost of Ownership: Costs over the product or service’s lifecycle.
• Operational Efficiency: Improvements in productivity and reduced downtime.
• Sustainability Impact: Reduction in waste, energy consumption, or carbon footprint.
• Customer Satisfaction: If procurement affects end-user experience, track feedback, and service levels.

Common Challenges and How to Overcome Them

Resistance to change

Switching to value-based procurement requires a shift in mindset. Educate stakeholders on the long-term benefits and provide data-driven insights to support decisions.

No data

If your business isn’t using procurement analytics, it’s harder to measure value. Invest in tools that track supplier performance, costs, and operational impact.

Balancing cost and value

Some stakeholders may push for cost-cutting. Demonstrate how a slightly higher upfront cost leads to long-term savings and better outcomes.

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