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CHAPTER 4
PROCUREMENT AS A SUPPORT AND STRATEGIC FUNCTION WITHIN COMPANIES
these objectives and strategies. The three challenges above require managerial
and strategic skills of the highest order if they are to be overcome [2].
4.3.3 TRANSLATING PROCUREMENT OBJECTIVES INTO PROCUREMENT
GOALS
A major part of the strategy development process is the creation of strategic
objectives, including for procurement within an organisation. Procurement, as
mentioned earlier, has a major role to play in developing these objectives; the
next step is translating them into concrete goals.
Each objective must be translated into a specific goal or goals that become the
basis for a commodity strategy development process. The types of procurement
goals and associated objectives are shown in Table 4.1.
Table 4.1:
Linking procurement goals to procurement objectives.
Procurement objectives
Procurement goals
Reduce the overall number of
suppliers.
Reduce the supplier base by 20% in the
coming fiscal year.
Reduce overall levels of
inventory.
Reduce parts inventory supply to 15
days or less.
Increase quality of all products
and services procured.
Reduce the average number of quality
defects by 150 parts per million on all
materials received within one year.
Reduce overall costs of goods
purchased.
Reduce materials costs by 10% within
one year.
Outsource non-core competency
activities to outside providers.
Qualify two new suppliers for all logistics
services by the end of the fiscal year.
The next step is to translate company-wide procurement goals into specific
commodity-level goals [2].
4.4 PROCUREMENT STRATEGY DEVELOPMENT PROCESS
In this section we cover the commodity strategy development process under
the following headings:
• Define business unit requirements.
• Define strategic importance of an item and/or service procured (portfolio
analysis).
• Determine business/purchase requirements and conduct a market analysis.
• Set goals and conduct a gap analysis.
• Develop a sourcing strategy and set objectives.
• Execute strategy.
• Monitor results and review performance.