At its essence, a strategy is a high level plan needed in order to achieve a goal or objective.
In a military sense (which is where I believe the concept originated) an objective is to weaken the position of strength of an enemy in a specific location, a goal is to occupy key high grounds in the area concerned and the strategy is capture a hill at a time with ground artillery fire and disrupting enemy provision and supply lines – rather crudely put but in relating this to businesses strategy and objectives, I suggest there is no difference.
Procurement strategy needs to point to long term plans required to not only underpin but be a vehicle for the company’s mission, vision and objectives – so the methodology here is top level mission, vision, objectives followed by strategies.
For the sake of illustration, an objective of a business is to be the supplier of choice of bulk liquid storage solutions to the dairy industry. The business manufactures storage tanks in a factory and delivers to site but also offers project management options for turnkey on site construction.
Procurement strategy? This needs to include reliability and continuity of supply for materials such as food grade stainless steel, fluid management solutions for the food industry (including pumps and valves), research and statutory frameworks – no wonder Procurement is a profession that is not for the faint hearted.
The strategic framework must include all of the aforementioned as well as be forward looking to the end customer and be his supplier or partner of choice. It must also include the right mix of resources needed to meet those objectives.
What does this include – based on the example;
- We will partner with suppliers and service providers committed to our business and the dairy industry.
- We will employ and resource the Procurement team with a balanced mix of experience and academically trained professionals.
- Our team will be underpinned by the principle of continuous improvement and value generation for our business as well as our customers (no surprises there – if we don’t do this then someone else will come along and do that in our stead; how will this be achieved? Procurement centre of excellence among others)
A basic set of strategies and a frame work so now comes the sourcing strategies; I hold the view that sourcing is a sub component or an extension of procurement so a sourcing strategy follows procurement strategy. Some components of sourcing strategy;
- Category specific
- Sourcing plan (RFX, RFP, RFT et al)
- Time specific?
- Area or zone specific?
An example of a strategy outline “We will tender and contract with suppliers of food grade stainless steel that are committed to our business operations in New Zealand” a lot in this statement; it could also be expanded to include a reference to timing (eg to deliver steel products in line with our production programme) and resources (eg we will approach the markets with a cross functional team of business professionals).
My contribution to a discussion on a profession I believe in and am committed to. This discussion does not do justice to the complexity and importance of strategy in procurement and sourcing activity. There is so much more to be considered when carrying out strategy planning so I ask purists to keep this in mind when responding – space and time constraints prevented more in-depth analysis.