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CHAPTER 4
PROCUREMENT AS A SUPPORT AND STRATEGIC FUNCTION WITHIN COMPANIES
4.4.1 DEFINE BUSINESS UNIT REQUIREMENTS
The business unit functional strategy acts as the driving force for organisational
procurement strategies for the products and services procured by the business
units within the firm. These are translated into purchasing goals and, from these,
commodity strategies are developed for commodity families.
The development of a procurement strategy is often carried out by commodity
teams, i.e., teams of procurement professionals dedicated to the procurement of a
specific commodity, or groups of commodities. Commodities are general categories,
or families, of procured items such as fuel, office supplies, wood, cotton, etc.
A commodity team is frequently formed from employees across the business
who are familiar with the commodity being procured. The commodity team is
responsible for developing a commodity strategy, which defines the details and
action plans for managing the commodity [2].
4.4.2 DEFINE STRATEGIC IMPORTANCE OF ITEM AND/OR SERVICE
PROCURED
The next step is to understand the relative of the product or service procured
importance to the business unit objectives. This is typically achieved through a
tool known as portfolio analysis.
Figure 4.1 presents the
Portfolio Matrix
, a tool every supply manager should
have in his or her tool kit. Presented in the timeless and classic 2x2 format, the
matrix recognises that an effective supply organisation must apply a variety,
or portfolio, of strategies and approaches given different supply requirements.
The 2x2 matrix has been around for quite a while. This concept, although not
this specific tool, was first articulated by Kraljic in his 1983
Harvard Business
Review
article titled
Purchasing Must Become Supply Management
[1].
Figure 4.1:
The Portfolio Matrix.