Strategic Procurement Activities

Procurement management is a strategic role and the key objective is to meet the business goal of the company.

In order to achieve the demand placed on the operation, the procurement function by itself must able to play the part effectively and to do so, there are certain number of area which need to be focus
upon.

These parameter which need to be review and evaluated are as per diagram below.

Internal Analysis -  the need to review all current business needs and internal operational issue. What are the strength and weakness adherent to the current business structure need to be identified. For example, where is the company position in term of marker share? Is the company cost of operation is at the best optimum level or need to improve? What the contribution factor which causes the company business to be at the undesirable level? Is the company need to refocus onto more strategic plan for sourcing to reduce cost or to be in better position to negotiate? Are there suppliers whose performance is below average and contribute to the company weakness?

Supplier Management -  what type of strategy need to be in place to have better control over supplier performances? Is the Supplier Relationship and Performance Management need to be further strengthened? Is the company practicing a reactive supplier management system instead of to be more proactive? What are the percentage of supplier who is actually performing to the level desired? Pareto law indicated that, normally, 20% of root causes is helping to create 80% of the overall problem. Does the company procurement chief operating officer need to reevaluate this area and arrange a strategic strategy to ensure company goal are met?

Market Intelligence -  Strategically, one of the most critical influence which can contribute to a business growth or decline will be the external environment condition. The need to gather information and run a risk profile on a number of key issue is a necessity to ensure procurement strategic strategy can be achieve. Taking step to overcome future potential issue is a pre condition to overcome many business issue.

Sourcing Strategy - Depending on the analysis done, confidence level on the supplier performance and output gathered from the market intelligence, a sourcing strategy can be put into place to determine the objective to be met.

Overall cost leadership – sourcing to provide best optimum cost to the customer or company. Review supplier with high costing and look for cheaper alternative.

Differentiation strategy -  sourcing for new source which offer a different level of services and product. This to act as alternative offer  to the marketing of new niche range or provide a different more efficient process for production to be more efficiency.

Focus on business need – sourcing to ensure company interest in the market place is secured by addressing the need on the market segment. Example sourcing for material or product which will add value to a particular market segment. This could be new development or revising current product by adding new material or product offering.

Inventory Management - one of the key procurement focus is inventory. This area are often ignored by procurement or purchasing professional due to misconception that inventory management is the responsibility of the logistics and warehousing team. While, this is true, but the impact of poor inventory control lead to internal bleeding of resources and lead very often to fire fighting to resolve issue. Poor inventory management lead to many other related issue which will impact procurement role. Example, poor inventory control resulting in high level of unproductive stock kept and this will lead to additional cost of operation and leading to high cost for the businesses.

Contract Management -  having a well written contract does not solve all problem if the contract is not managed effectively, Contract management include step to preempting potential issue from occurring instead of relying on the contract to challenge non performances. Best practices in contract management are broken down into 4 different area of best practices.  Control , Interact, Adapt and Planning.

Procurement main task is to manage the supply of material to the

businesses efficiently. With this in mind, the key strategic 

objective must be inline with the overall business goal.