Topic 8 Procurement Strategy (Full Slides) PDF

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Purchasing and Commodity Strategy Development

Presentation Plan ― Remaining portion of Lecture 7:Global Sourcing ― Strategy Development •

Overview and Key Questions related to Procurement and Commodity Strategy Development

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Level of strategy (corporate vs business) Integrative Strategy Development Procurement Strategies

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Overview

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Procurement is a major contributor to a firm’s competitive advantage.

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Procurement goals drive both strategic procurement processes and commodity strategies.

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Provides a step-by-step process to translate corporate strategy objectives into procurement strategies. 3

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Key Questions What is strategy ? Why strategy is important ? What are linkages between strategy , procurement and supply chain management? 4

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Three Basic Questions of Strategy Strategy is about choice that deals:

 Where are we now?  Where do we want to go ?  How do we get there ?

Definition of strategy

The determination of the basic long term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goal - CHANDLER Information Technology Services

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Definition of Strategy

The strategy is about the tactics how companies views and solve issues IF THERE WERE ONLY ON IDEAL POSITION, THERE WOULD BE NO NEED FOR STRATEGY 7

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Corporate vs Business Level Strategy Corporate level Concerned with: 1. Determining the types of businesses the firm should be in to maximise profitability. 2. The acquisition and allocation of resources for these business units 3. Evaluating long term survival of a firm

Business Level

Strategies developed within the Strategic Business Unit – SBU. SBU deals with: 1. Deciding the scope and boundaries of each business units. 2. Linking strategies of each business with the corporate strategies. 3. Deciding the basis on which each unit will maintain competitive advantage within an industry.

Integrative Strategy Development

Components of Integrative Strategy Development Company Objectives Continuous Improvement

Cross-Functional Business Objectives

Performance Measurement Review

Procurement & Supply Chain Goals

Performance Measurement System 10

Procurement & Supply Chain Strategies RMIT University© September 2018

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Corporate and Business Strategy

The Linkage Between Strategies and Procurement

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The Linkage Between Strategies and Procurement

Objective vs goals in supply management Goals and objectives differ across four major dimensions:

Time frame:

Objectives are open ended; goals are time based.

Measurement: Objectives are stated in relative terms; goals are more specific.

Specificity:

Objectives are stated in broad, general terms; goals are in terms of a particular result.

Focus: Objectives are externally focused; goals are internally focused.

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Translating Objectives into Procurement Goals Procurement must couple each objective with a specific goal that it can measure and act upon. Examples of coupled objectives and goals: Objective: Low cost producer within our industry. Goal: Reduce material costs by 15% in one year.

Examples of coupled objectives and goals: Objective: Reduce product development time. Goal: Develop formal supplier integration process manual by end of fiscal year. Objective: Reduce number of suppliers used. Goal: Reduce supply base by 30% over 6 months. 15

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Types of Procurement Strategies Supply base optimization: determining the appropriate number and mix of suppliers to maintain. Total quality management of suppliers: working with suppliers to initiate quality processes and procedures to attain zero defect quality while endorsing continuous improvement. Global sourcing: requires purchasing to view the world as a potential source for products. Longer-term supplier relationships: the selection of and continuous involvement with suppliers. Early supplier design involvement: participation of suppliers at the concept or predesign phase of new-product development. Supplier development: working directly with a supplier to facilitate improvement in a designated functional or activity area.

The Procurement Strategy Development Process Bringing goals and objective together

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Ten ways of Managing Supply Chain Risk Diversification

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Stockpiling

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Redundancy

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Insurance

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Supplier selection

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Supplier development

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Contractual obligation

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Collaborative initiatives

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Rationalisation of the product range 10

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Localised sourcing

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Summary Overview and Key Questions related to Procurement and Commodity Strategy Development Levels of Strategy (Corporate/Business) Integrative Strategy Development Procurement Strategies Supply Chain Vulnerability Information Technology Services

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