Strategic Procurement 02

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Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005

Strategy Thinking –The Five Elements

1. SystemPerspective

2. IntelligentOpportunism

3. HypothesisDriven

4. Thinkingin Time

5. IntentFocus

Strategy and Strategic Procurement

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Definitions of Strategy

As a plan, strategy is some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation.

As a ploy, strategy is a special maneuver intended to outwit an opponent or competitor.

As a pattern, strategy is a stream of actions (demonstrating) consistency in behavior whenever intended or not intended.

(See Chapter 2 – 2.2.1 – for more definitions)


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Eight Characteristics of Strategy

Concerned with long-term direction


Trying to achieve some advantage over competitors

Concerned with scope of an organisation’s activities

Matching of resources and activities of an organisation to the environment in which it operates

Building on or stretching resources and competencies

May require major resource changes

Likely to affect operational decisions

Strategies also affected by values and expectations of those who have power

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Prescriptive Schools

Descriptive Schools

Configuration School

Strategy Development – Schools Headings

- How strategies should be formulated

- Representing howstrategies are formulated

- Configurations andtransformation


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Prescriptive Schools

Descriptive Schools

Configuration School

Strategy Development – The 10 Schools Classification

DesignPlanning

Positioning

EntrepreneurialCognitiveLearningPower

ConfigurationsTransformation


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• Coordinating and integrating unit strategies• Developing distinctive competencies• Identifying product market niches• Monitoring products and markets

• Coordinating and integrating unit strategies• Developing distinctive competencies• Identifying product market niches• Monitoring products and markets

Business StrategyMiddle Tier

• Ensuring skills and competencies are utilised effectively• Integrating activities e.g., purchasing/marketing• Providing information and expertise

• Ensuring skills and competencies are utilised effectively• Integrating activities e.g., purchasing/marketing• Providing information and expertise

Functional/Operational Strategies

Lower Tier

Levels of Organizational Strategy

• What business should we be in?• Deciding grand strategies• Determining values• Coordinating and managing major resources• Deciding business locations and structures

• What business should we be in?• Deciding grand strategies• Determining values• Coordinating and managing major resources• Deciding business locations and structures

Corporate StrategyTop Tier


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Strategic Analysis and Tools of Scientific Analysis

Tools of Scientific Analysis

Developing a theoretically informed understanding of the environment inwhich an organization is operating together with an understanding ofthe organization's interaction with its environment in order to improve organizational efficiency and effectiveness by increasing theorganization's capacity to deploy and re-deploy its resources intelligently.

Developing a theoretically informed understanding of the environment inwhich an organization is operating together with an understanding ofthe organization's interaction with its environment in order to improve organizational efficiency and effectiveness by increasing theorganization's capacity to deploy and re-deploy its resources intelligently.

Definition of Strategic Analysis

• Environmental scanning• Porter analysis• Scenario analysis• Organisational appraisal• Critical success analysis• Gap and SWOT analysis


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Sector Impact

Industry Impact

Macro – Environmental

• Private• Public• Voluntary

• Entry barriers• Determinants of supplier power• New entrants• Rivalry• Substitution threat• Buying power• Legal restrictions

Refer to changes in:• Political• Economic• Social• Technological• Environmental• Legal environments

Organisational Strategy – Impact of Environmental Factors


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Internal Scrutiny

Resources • Money• Physical facilities• Human resources• IT resources

(see Figure 2.7)

(refer Chapters 3 and 4)

Culture

Value chains and structure

Critical success factors


Essential to Scan:

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Strategy Formulation

Articulates a realistic, credible and positive projection of the future state of an organisation or functions or operations within that operation.

Vision Statement

Answers the questions “What is our business?”Mission Statement

Explicit statement of the results the organisation wishes to achieveObjectives

Strengths, weaknesses, opportunities and threats analysisApplication of

SWOT Analysis


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Evaluation of Alternative Strategies“Four Principles”

Consistency The strategy must not present mutually inconsistent policies.

ConsonanceThe strategy must represent an adaptive response to the external environment and critical changes therein.

AdvantageThe strategy must provide for the creation and/or maintenance of a competitive advantage.

The strategy must neither overtax available resources nor create insoluble problems.

Feasibility


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Krajlic Portfolio Management

• Aims to guide managers to recognise the weakness of their organisation and formulate strategies for guarding against supplies disruption.

• Availability• Number of suppliers• Competitive demand• Make or buy opportunities• Storage risks• Substitution opportunities

• First introduced in 1983.

• Profit impact defined in terms of:

• Supply risk assessed in terms of:

• Volume purchased• Percentage of total cost• Impact on product quality or business growth


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The Main Stages of Strategy Implementation

Communicate strategic plans to everyone in the organisation

Obtain commitment from those concerned

Framing polices and procedures

Setting operational targets and objectives

Assigning responsibilities and commensurate authority

Changing, where necessary, organisational structures

Allocation of resources and agreeing budgets

Providing training for employees


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Post-implementation Evaluation, Control and Review

Evaluation Criteria

Control Process

Review

• Internal consistency• Environmental fit• Resource fit• Communication and implementation

• Establish performance standards• Measure performance• Compare actual with planned• Take appropriate corrective action

• General strategy• Alternative strategy• Alternative methods


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Organization's vision, mission and valuesOrganization's vision, mission and values

Organization's overall strategyOrganization's overall strategy

Strategic sourcing analysisStrategic sourcing analysis

Proactive demand managementProactive demand management

Acquisition pre-contractAcquisition pre-contract

Acquisition post-contractAcquisition post-contract

Strategic Purchasing and Supply Chain ProcessCIPS Model Key Points

Review contract and/or relationship or end contract and/or relationship


Strategic Procurement 02

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