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CHAPTER 4
PROCUREMENT AS A SUPPORT AND STRATEGIC FUNCTION WITHIN COMPANIES
to organisational objectives and strategy; and how the organisational objectives
and strategy properly reflect the contribution and opportunities offered in the
supply chain. Procurement strategy must link with and support organisational
goals and objectives.
Terms abound in business strategy, i.e., re-engineering, world-class
manufacturing, best in class, etc. This proliferation of terms shows that
organisations are in a state of constant and dynamic change; however, they
do not always capture the processes that occur when developing a corporate
strategy.
What is a corporate strategy and how is it best defined? According to Richard
Vancil of Harvard University, the strategy of an organisation is a conceptualisation
of the organisation’s longer-term objectives and purposes, the broad constraints
and policies that govern activities and a set of action plans and near-term goals
expected to help achieve the organisation’s objectives [1].
The strategy of an organisation is an embodiment of the firm’s long-term
objectives and purposes, the constraints that restrict the firm’s activities, the
markets within which the firm operates or wishes to operate. It also expresses
the firm’s desired position within those markets, its goals and objectives and
the action plans required to achieve these goals and objectives. The corporate
strategy must contain a specific plan of how the firm will differentiate itself from
its competition, achieve long-term growth, manage its costs, keep abreast of and
respond to changes in the market, achieve customer satisfaction and remain
profitable and, ultimately, meet the expectations of shareholders.
4.3 PROCUREMENT AND CORPORATE STRATEGY
It is important that the procurement strategy within an organisation be linked to
and support corporate strategy. Often, significant obstacles to the development
of an effective supply strategy result from difficulties in translating organisational
objectives into supply objectives. In this section we cover linking procurement
and corporate strategy; translating corporate objectives into procurement
objectives; and translating procurement objectives into procurement goals.
4.3.1 LINKING PROCUREMENT AND CORPORATE STRATEGY
It is beyond the scope of this chapter to go into the development of corporate
strategies. However, the economics associated with a corporate strategy are
important to understand, at least at a high level. In short, an organisation must
take in more than it spends on operating costs in the long term if it is to grow
and remain profitable. Either increasing revenues or decreasing costs or both
can accomplish this.
Procurement plays an important role in helping to accomplish both objectives.
Through effective procurement strategies an organisation can position itself