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CHAPTER 4
PROCUREMENT AS A SUPPORT AND STRATEGIC FUNCTION WITHIN COMPANIES
information for this research can come from the Internet, supplier literature,
government reports, professional associations, trade magazines, the Thomas
Register and database research [2].
4.4.4 SET GOALS AND CONDUCT A GAP ANALYSIS
The next step is to establish specific targets for evaluating progress against
goals. Goals should relate directly to the objectives and requirements of the
business and business unit/s. Effective goals, which are established jointly
with stakeholders, should be measurable and action-oriented, evaluate internal
progress over time, and compare performance to external benchmarks and
competition. They should also go beyond price and are based on total costs.
Goals should also be based on competitive analysis, comparison with market
leaders and future trends. The proposed strategy must include details on the
specific actions required to achieve these goals. As an integral part of this, a
gap analysis should be carried out to determine the firm’s current standing in
terms of its competition [2].
4.4.5 DEVELOP SOURCING STRATEGIES AND OBJECTIVES
The strategy should include the relevant criteria included in the research,
including best suppliers, risks, costs, profit potential and so on. The strategy
should include the following:
• Recommended suppliers, location and relative size (local, regional or global
supplier).
• Number of suppliers and amount of business to be awarded to suppliers.
• Length and type of contract.
• Product design requirements and extent of required supplier involvement in
product and/or service design.
• Supplier development and relationship management required, and activities.
• Overall market supply recommendations.
Many of these criteria will flow from and be a function of the area of the
portfolio analysis matrix in which the commodity and/or service was classified.
For example, a commodity that falls into the market quadrant would not be a
candidate for a strategic alliance with a supplier or suppliers. Conversely, items
with high purchase volumes have a potential for significant savings by, for
example, consolidating spend with fewer suppliers and through standardisation.
4.4.6 EXECUTE STRATEGY
In this step, procurement professionals carry out the strategy. Key elements of
strategy execution include the following:
• Document and communicate the strategy to all concerned, including owners,
stakeholders, customers, suppliers, etc.