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Leading Procurement Strategy

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Leading Procurement Strategy

Driving Value Through the Supply Chain

Kogan Page,

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Procurement – formerly called “purchasing” or “supply” – used to be a business backwater. Now it’s a strategic edge.

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Editorial Rating

8

Qualities

  • Innovative
  • Applicable

Recommendation

Procurement – once known merely as “purchasing” or “supply” – used to be a business backwater with no prestige. Today, procurement is increasingly important as a strategic differentiator. The way procurement executives plan, organize and manage your supply chain is the “only source of sustainable competitive advantage remaining today.” This collection of informed essays by supply-chain experts Carlos Mena, Remko van Hoek, Martin Christopher and others details the current best practices in this crucial area. getAbstract recommends this anthology as an indispensable minicourse on corporate procurement and its likely future direction.

Summary

From Tactical Operator to Strategic Contributor

Most firms spend about half of their sales revenue to buy needed products and services. When organizations spend wisely, they improve their performance and earnings. When they spend unwisely, profits suffer. Yet, many corporations don’t give procurement its proper due, relegating it – and the chief procurement officer (CPO) – to a subsidiary role. However, since the mid-1980s “the role of procurement has been transformed from a clerical activity to a strategic function.”

In most companies, this transition unfolds in four stages:

  1. “Transactional procurement” – At this level, procurement means only purchasing. Decentralized decisions are tactical, not strategic. Procurement personnel need only basic IT and clerical skills.
  2. “Cost-driven procurement” – Procurement becomes more strategic internally, but does not align with overall strategy. CPOs develop a holistic view of the costs of their purchases by using sophisticated tools, including spending analysis. Yet, most procurement managers at this stage still operate with a “cost-reduction” mind-set instead of a “value...

About the Authors

Carlos Mena directs the Center for Strategic Procurement and Supply Management at the Cranfield School of Management, where Remko van Hoek is a visiting professor. Martin Christopher previously headed Cranfield’s Demand Chain Management department.

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