As businesses today continue to harness the power of globalization to expand performance, the role of effectively sourcing goods and services from suppliers has become inevitable. It can have a profound impact on a companys financials and can strongly influence the purchasing and procurement processes. Surprisingly,elsewhere in the world,the purchasing word remains prevalent. Procurement reform act and the pubic contracts scotland regulations 20154 and the key strategic and operational requirements therein. The traditionalist perspective sees scm as a strategic aspect or subset of procurement. Strategic procurement planning in the adb procurement cycle 2 2. Sustainability will cover environmental, economic and social issues, and the procurement process will consider all three elements during the procurement strategy. The purpose of this corporate procurement strategy is to assist nifrs in delivering its overall strategic goals and objectives and defines the role of procurement in ensuring that procurement planning reflects nifrs corporate objectives.
Strategic sourcing institute for supply management. The guidance note enables borrowers to take a more flexible approach to developing a procurement strategy and procurement plan. Five steps to building a successful procurement strategy. Strategic sourcing strategic sourcing overview carol conner, business process manager denny feldman, manager, strategic sourcing strategic sourcing what is strategic sourcing.
A properlytailored approach depends on the current state of the organizations procurement operations, the companys view of procurement, current market. Developing the strategic sourcing strategy is a fundamental part of the purchasing and supply management process. Some considerations for an external influences analysis 8 6. New skills for procurement people are becoming important for new supply chain. Mar 24, 2020 the concepts in strategic procurement require communication and cooperation between the business unit and financial services and that procurement be implemented effectively. Procurement deals with the sourcing activities, negotiation and strategic selection of goods and services that are usually of importance to an organization.
Procurement, by definition, is the acquisition of the materials, supplies, services, etc. Perspectives on what public procurement is or should be vary. How does this definition of strategy fit into the procurement arena. Pdf strategic procurement management lecture notes by. Cost reduction a reduction in the cost to do business. What it is what it is not focused on the total cost of ownership tco incorporating. The cips body of knowledge is eloquent on the definition of purchasingbut was scant on the definition of procurement. Strategic procurement planning strategic approach 3 3. As a strategic function of the organization, procurement must be engaged in the. Because purchasing is a process within the overarching procurement process, both procurement. Based on theory derived from academic articles and books, students in groups of 34 wrote one chapter for the overall course book with the joint ambition to describe and discuss the state of the art of strategic.
Flowchart of the strategic procurement planning process 4 4. Strategic sourcing is an approach to supply chain management that formalizes the way information is gathered and used so that an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace. Strategic procurement is an organizationwide process. It argues that organisations should develop strategically aligned supply. A continued emphasis on procurement reform will be central to maximising savings and benefits, as well as recognition of the importance of procurement as a key strategic enabler of service design and service delivery. However, strategic sourcing can go well beyond cutting costs.
In addition to hard dollar savings, there will be additional savings generated through a more efficient business operation and therefore increased profitability. Strategic procurement entails the development of a true partnership amid the buying company and the supplier strategic value over welldeveloped longterm plans to ensure a timely supply of goods and. The strategic value of procurement in public entities nigp. Additionally, procurement is transforming into a more strategic function that is aligned to organizational goals and objectives. Strategic sourcing is an approach to supply chain management that formalizes the way information is gathered and used so that an organization can leverage its consolidated purchasing power to find the. The process, illustrated in diagram 1, is a generic process that assists departments in adopting a strategic asset management approach to building projects. Strategic procurement from a sector wide standpoint has many benefits for caudit members. Strategic procurement incorporates actions aimed at reducing the supplier base, negotiations, communication and maintaining longterm relationships with suppliers ryals and rogers, 2006. Companies implement purchasing strategies in order to make cost effective purchasing decisions from a group of efficient vendors who will deliver quality goods on time and at mutually agreeable terms. Procurement strategy 6 procurement strategy is the packaging contracting pricing, and targeting strategy and selection procedure for a particular procurement organization of work packages into. A practical guide for procurement planning and management of. Procurement strategy defines a plan for optimizing external spend, procurement operations and other value contributions in a manner that supports the overall corporate agenda without a comprehensive procurement strategy in place, its impossible to know whether or not your procurement organization is aligned with the corporate.
A method of managing procurement processes for an organization in which the procedures, methods, and sources are constantly reevaluated to optimize value to the organization. Aug 05, 2018 during consulting engagements i often confront a philosophical battle raging between tactical sourcing and strategic sourcing. Strategic sourcing is organized since some type of methodology or process is needed. The ongoing pca process and how that falls within the audit scotland purview of how. Strategic sourcing, which is considered a key aspect of supply chain management, involves elements such as examination of purchasing budgets, the. At all levels of government, inconsistencies exist regarding the body of knowledge and terminology used to define public procurement. We informally have a strategy, but its not documented c. By our definition, strategic sourcing is an organized and collaborative approach to leveraging targeted spend across locations with select suppliers that are best. This team sets the overall direction for procurement, aligned with the business strategy. Procurement refers to the process of identifying, shortlisting, selecting, and acquiring suitable goods or services or works from a third party vendor through a direct. Public procurement practice strategic procurement planning. The efficiencies that procurement and purchasing software can bring to your companys procurement strategy can eliminate overspending and yield huge savings both time and money, regardless of the size of your organization conclusion. Strategic collaborative procurement may also be used to establish a group of vendors providing hardware, software and services in a particular area, referred to as a panel agreement. As a strategic function of the organization, procurement.
Strategic procurement management is the process of planning, implementing, evaluating, and controlling strategic and operating purchasing decisions for directing all activities of the purchasing function toward opportunities consistent with the. The latter enables any department or entity to prescribe. During consulting engagements i often confront a philosophical battle raging between tactical sourcing and strategic sourcing. And effective strategic procurement management within your organisation will ensure that this takes place.
For purposes of this paper, strategic sourcing will be defined as the. Strategic sourcing is a logical process involving the application of tools by skilled, competent and knowledgeable people. A systematic and factbased approach for optimizing an organizations supply base and improving the overall value. Procurement vs purchasing the differences and similarities. Procurement strategy development procurement academy. Create and embed optimum procurement strategies across the university in consultation with stakeholders. The cipsa steering group set about the task with relish. Organizations should set up a strategic procurement team. The purpose of the document is to set out the short, medium and long term objectives for the delivery of procurement improvements across the university, along with the proposed methods of managing and reporting on performance.
The procurement strategy plan the procurement team will create must be aligned and related to these goals so that the implementation of the strategy plan can positively affect and impact the business operations. The first two perspectives are associated with the notion of scm as integrated management of an organisations supplyside relationships. Longrange plans for ensuring timely supply of goods andor services that are critical to a firms ability to meet its core business objectives. Developing and implementing a strategic sourcing strategy. It requires input from all departments and functional areas for an organization. Develop, promote and implement appropriate procurement strategy, category. Public procurement practice strategic procurement planning standard public procurement should understand its purpose in relation to the organization and constituency that it serves. Strategic procurement planning sp2 is the transformation of an organizations mission, goals, and objectives into measurable activities to be used to plan, budget, and manage the procurement function. All of this means that resources time, money and people need to be effectively allocated and successfully used. Strategic procurement management is a partnership between your users those who have a need for the spend and own the specification of what is to be bought and procurement specialists. This involves selecting fitforpurpose procurement approaches and methodologies. Make sure that you will set all the strategic planning process expectations involving procurement. To keep from this, we will keep any secondary definitions to key words that are important for the discussion of procurement.
This book explores the appropriateness of procurement strategies in certain situations. A practical guide for procurement planning and management. What is strategic sourcing and why is it important. The primary concept of strategic procurement is that through advanced planning, scheduling, and group buying initiatives, a firm can experience significant cost savings. Tactical sourcing can bring shortterm gain at the cost of longterm optimization of the supply base. Mastering procurement a structured approach to strategic. A practical guide for procurement planning and management of strategic public health supplies 7 preface access to medicines and strategic public health supplies is a global priority which has. It argues that organisations should develop strategically aligned supply chains to deliver predictable and sustained performance improvements and asserts that the assumption that one approach is appropriate to manage all cirumstances is flawed. Strategic procurement planning sp2 is the transformation of an. A strategic procurement strategy does not simply involve coming up with short term solutions, but rather involves coming up with strategies that will work in the long term. Definitions according to the merriamwebster dictionary online, procurement. What is the difference between strategic procurement.
The city of houstons strategic procurement division has decided to suspend all onsite prebidpreproposal conferences until further notice. The purpose should be clearly stated, in written format, through the development of a mission, vision, and values statement that is specific to the procurement. There are probably three key terms to consider to answer this question. It is particularly relevant in light of globalisation on the sales side it. A procurement management plan must provide procurement strategies that will allow the business to maximize its benefits in the processes of procurement. Pdf strategic procurement in supply chain management. Pdf increasingly, procurement management is becoming a strategic priority of firms for their sustainable competitive advantage in turbulent times. Van weele 3 defined procurement as all activities that are required in order.
The procurement risk framework emphasizes the need to treat and manage risks after identification and highlights risk management as. A third approach would be a hybrid procurement system supported by affordable erp technology and a small team of two to three commodity specialists. In the past 3 years, procurement volumes have grown significantly in the health, elections, sustainable energy and crisisresponse sectors. Lets clarify any confusion on the difference between procurement and purchasing. Strategic procurement in construction this book explores the appropriateness of procurement strategies in certain situations. City of houston strategic procurement division 03162020 update.
Strategic procurement is one,it relates to the strategies and mechanisms used to approach and interact with the supply market that take account not just of present business needs but also what the organisations business future needs might be. Strategic sourcing manager job description position summary sourcing manager to be responsible for the companys end to end sourcing of products and services essential for our operations. Jonathan mak rfp solutions, inc 2024043 carling ave. A guide to the development of procurement strategies for the. Strategic procurement plans are generally created by top level management within a company or within a companys procurement. A practical guide for procurement planning and management of strategic public health supplies 7 preface access to medicines and strategic public health supplies is a global priority which has assumed a central position in national health agendas in the region of the americas.
Theories about procurement and supply chain management. The process, illustrated in diagram 1, is a generic process that assists departments in adopting a strategic. The strategic objectives of waikato district council wdc are defined by our. We have a simple documented strategy, but its not very comprehensive, more of a vision statement d. Strategic procurement is a methodology used in many organizations to realize the greatest amount of benefit to the company while still effectively managing the costs associated with the acquisition of. Procurement strategy 6 procurement strategy is the packaging contracting pricing, and targeting strategy and selection procedure for a particular procurement organization of work packages into contracts how to secure financial offers and to remunerate contractors nature of the relationship between the parties procedures for. This is basically exchanging money for goodsservices and then receiving them. Pdf increasingly, procurement management is becoming a strategic. Needless to say, strategic sourcing is doing the right thing for this purchasing organization. Procurement accounts for nearly two thirds of all undp deliveryand the demand for procurement services is growing. Tactical sourcing can bring shortterm gain at the cost of long.