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CHAPTER 1
PRINCIPLES OF SUPPLY CHAIN AND PROCUREMENT MANAGEMENT
Category Typical characteristics
Possible strategies
Bottleneck
(high risk
and low
spend)
Highly specialised goods,
services or works.
• Procurement is often
undertaken by technical
experts rather than
procurement professionals.
• Technical specifications are
inappropriately detailed and
limit the supply base.
• Often there are only a few
potential suppliers.
Reduce the organisation’s market
vulnerability and secure on-going
supply by:
• Identifying alternative sources of
supply and/or substitute goods or
services.
• Holding extra stock where possible
reduces risk.
• Developing supplier capabilities and/
or changing demand requirements.
• Ensuring long-term agreements may
secure supply from key suppliers.
• Encouraging new supply participants
into the market.
• Considering local supplier
development strategies.
• Developing contingency plans to
deal with potential disruptions to
supply.
• Developing performance or
functional specifications to ensure a
wider sourcing base.
• Developing a mixture of technical
expertise and procurement skills to
manage supply.
Strategic
(high risk
and high
spend)
Represents goods, services
or works that are critical to
the organisation.
• It is often a complex ‘bun-
dle’ or ‘package’ of goods
and associated services.
• Requires innovative solu-
tions and high-level exper-
tise from suppliers.
• The suppliers’ attitude to
the organisation (whether
or not they consider the
organisation a valued cus-
tomer) has a high impact
on the value and quality
of the goods, services or
works delivered.
• The category represents
very few transactions and
there are often very few
suppliers available.
• The costs in offering con-
tracts are substantial for
both the procuring organi-
sation and the supplier.
Manage relationship and performance
through regimes and systems which
are essential to secure value for
money and reduce risk by:
• Encouraging effective supplier
relationship management for
complex and costly bundles of goods
and services.
• Correctly understand supplier
needs and agree on performance
management criteria and interfaces.
• Maintaining regular communication
with suppliers to ensure innovation
and continuous service level
improvements.
• Encouraging local suppliers with an
incentive to deliver long-term value
rather than suppliers for which the
business is not significant.
• Helping to develop suppliers’
performance levels.