Defining an adequate strategy is not merely a theoretical exercise created by executive management in their ivory tower. When done properly, it is sufficiently practical and comprehensive for every member of the organisation to understand and use, including procurement.
As the strategy will have budgetary implications, impact contracts, and determine the proceedings with future contracts, application consolidation, new sourcing models, quality requirements, strenghtened policies, etc. will undeniably increase the importance and efforts of procurement’s proactive role within the organisation.
It cannot be expected that procurement will automatically address all issues resulting from the strategy without clear guidelines on how this strategy relates to service level agreements, privacy clauses, pay-per-use models, licensing schemes, and partnerships.
Traditionally, each department maintains many contracts with a wide range of suppliers, some of them rather substantial; thus, optimisation by means of introducing standard contracts, service level agreements, and legal clauses not only result in savings but will also be less complex to manage. The service that is delivered to your end-customer will only be as strong as your weakest link within the value chain.
Including procurement in strategy is not an obvious task and might raise some eyebrows regarding what the objectives may be. The strategic intent for procurement is to take up a more proactive role when it comes down to increasing knowledge of the core market, pricing that conforms to the market, alternative payment schemes, revenue sharing models, etc.
- Raise the question on how procurement can not just support the strategy but also on how they can become part of it.
- Question and identify procurement’s role in every aspect of the overall company strategy. In other words, address the strategic role of procurement each time a strategy topic is discussed.
- Set targets that can reasonably be expected from procurement when extending its role from purchase-related activities to more market and product knowledgeable ones.
Decision: What are our objectives towards strategic procurement?
Deliverable: Indication of procurement’s strategic role
Owner: Governance manager, Procurement officer
Research Strategic sourcing, Spend forecasting
Managing Partner Xperian bv