97 / 252
85
CHAPTER 4
PROCUREMENT AS A SUPPORT AND STRATEGIC FUNCTION WITHIN COMPANIES
other issues of importance determined in the negotiating process with suppliers
and spelled out in the contracting process.
4.6.4.2 Government
Procurement will sometimes maintain links with government departments at
various levels. Procurement may need to consult with, and obtain guidance from,
government agencies on various matters including environmental protection
and prohibited goods.
4.6.4.3 Local Communities
Procurement may have contact with local communities. Procurement groups
can have the ability to affect certain social goals. This can include sourcing
from local suppliers, awarding a certain percentage of business to minority
suppliers and ensuring ethical business practice in all dealings with local
business communities.
4.7 EVOLVING SOURCING STRATEGIES AND BEST PRACTICES
The value proposition of virtually every procurement organisation evolves
through several major stages. These start, at the foundation, with addressing
business continuity issues by assuring on-time delivery of quality goods and
services, and move through tactical sourcing and transactional purchasing and
expediting.
Procurement organisations move up the value chain to focus on reducing
purchase costs and then total supply costs. The former is usually done by cross-
functional strategic sourcing teams, led by procurement and organised around
supply markets. Unfortunately, rather than being true cross-functional supply
teams that are extended to suppliers to reduce overall lifecycle costs, they tend
to get implemented as ‘drive-by sourcing events’. This sees the contacts being
thrown back at office and operations groups to figure out how to implement them.
The real tipping point occurs in the latter stages of the evolutionary model and
this is where world-class firms focus primarily. While the first stages of the
model are supply-centric, the final two shift the focus to internal and external
customers. This helps procurement gain the voice of the customer and assurance
of relationship from the budget owners, rather than just looking for assurance of
supply, and also helps procurement to shape consumption and supply drivers
so the broader organisation can gain more value from its spend.
At the final stage – value management – the chief procurement officer’s agenda
should be in sync with that of the CEO and CFO (innovation, growth, sustainability,
predictability, and so on) and there should be no parallel measurement system
for procurement that’s different from that of the enterprise [10].