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Make procurement great again

The real challenge is creating functional strategy that works and delivers for the business.

Make procurement great again

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Vaida Maksims
www.futureproofitable.com
Creating Procurement Management Strategy
Why should Murphy be everyone’s friend?
Index
What is a strategy?
Before we start to plan – let’s play!
The process of strategic planning
Procurement is a part of the organization
Procurement strategic management cycle
Generic business strategies – defining the goal
Current situation analysis: the structure of the resources
Current situation analysis: interpreting results
Strategic procurement management: the plan
Plans and reality
Why does Murphy sometimes win?
Reacting to change
Questions?
What is a strategy?
The organization’s area
and direction of activity
over the long run in a
changing environment,
aiming to secure
stakeholders’ benefits and
expectations through
resource and competencies
allocation.
What is a Strategy?
P
l
a
n
n
i
n
g
B
e
n
e
f
i
t
Strategy - kryptingas tikslų siekimas
Strat*e*gy
A plan of actions to achieve specific goals
Organisation’s mission and vision?
Organisation’s long term direction and strategy?
The expectations and values of the stakeholders?
Organisation’s activity characteristics (products, geographical reach, business
areas)?
Unique point of sales, competitive advantages (“so what?”)?
Available resource and resource management policy in the organisation and
department?
Before we start to plan – let’s play!
Are all of the “self explanatory” questions really so self explanatory?
The Process of Strategic Planning
There is not “one” right magic formula describing how planning should happen – it is a
part of a continuous improvement process:
Rational planning
•Directional
•Regimented
•Static
•Non-flexible
Forming planning
•Reducing uncertainty
•Adapting to the
environment
•Experimenting
•Allowing errors
•Integrating various needs
•Including signs of structure
Logical incrementalism
•Small incremental strategic
changes
•Destination might not be
clear at the start of the
process
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Make procurement great again

  • 1. Vaida Maksims www.futureproofitable.com Creating Procurement Management Strategy Why should Murphy be everyone’s friend?
  • 2. Index What is a strategy? Before we start to plan – let’s play! The process of strategic planning Procurement is a part of the organization Procurement strategic management cycle Generic business strategies – defining the goal Current situation analysis: the structure of the resources Current situation analysis: interpreting results Strategic procurement management: the plan Plans and reality Why does Murphy sometimes win? Reacting to change Questions?
  • 3. What is a strategy?
  • 4. The organization’s area and direction of activity over the long run in a changing environment, aiming to secure stakeholders’ benefits and expectations through resource and competencies allocation. What is a Strategy? P l a n n i n g B e n e f i t Strategy - kryptingas tikslų siekimas Strat*e*gy A plan of actions to achieve specific goals
  • 5. Organisation’s mission and vision? Organisation’s long term direction and strategy? The expectations and values of the stakeholders? Organisation’s activity characteristics (products, geographical reach, business areas)? Unique point of sales, competitive advantages (“so what?”)? Available resource and resource management policy in the organisation and department? Before we start to plan – let’s play! Are all of the “self explanatory” questions really so self explanatory?
  • 6. The Process of Strategic Planning There is not “one” right magic formula describing how planning should happen – it is a part of a continuous improvement process: Rational planning •Directional •Regimented •Static •Non-flexible Forming planning •Reducing uncertainty •Adapting to the environment •Experimenting •Allowing errors •Integrating various needs •Including signs of structure Logical incrementalism •Small incremental strategic changes •Destination might not be clear at the start of the process
  • 7. Procurement is a part of the organisation You need to align the strategy on all levels and directions – vertically, horizontally and from the perspective of other external stakeholders Corporate Business unit A Business unit B Function 1 Function 3Function 2
  • 8. The cycle of strategic procurement management Total quality management and strategic analysis principles could and should be used for procurement Plan Do Check Act Strategic analysis models - Ishikawa - SWOT - PESTLE - Scenario planning - Porter’s 5 Forces - Porter’s “4 corners” analysis - Value chain analysis - 6, Lean - Early warning system
  • 9. Generic business strategies – the goal The organisation can be strong in all three aspects, but exceptional – only in one. Procurement helps to implement Innovationleaders • Innovations • Continuous learning • Risk taking • Fast new product development and route to market • Satisfying exceptional requirements • Continuously changing products Serviceleaders • Ease of cooperation • Customisation • Proactiveness • Flexibility • Relationship building and cross selling • Consultative apprach Priceleaders • Competitive prices • Error avoidance • Simple structures • Transactional operations • Right the first time • “Lean” operations
  • 10. Current situation analysis: the structure of resources You can start strategic design with classical management tools – business structural parts model (McKinsey 7s) 7S Strategy Systems Shared values SkillsStyle Staff Structure
  • 11. Current situation analysis: the structure of resources After adapting the classics to your situation, you could be looking at something like this
  • 12. Current situation analysis: interpreting the results While analysing, you should focus not on the absolute numbers, but rather on the gaps in the perceptions
  • 13. Strategic procurement management: the plan Depending on business goals and objectives, You will need different tools and resources Change advocates, risk takers, capable of operating in uncertain situations without instructions. Focusing on customers (internal and external), their service and satisfaction. Focused on rules, procedures and processes. Can often be on a "win-lose" side. Specialized in a narrow field and skills. Allowing and enabling changes quickly and easily. Supporting (without stopping) innovation. Flexible, non-restricting, allowing individual solutions. Focusing on the final outcome. Strong, simple, no space for improvisation. Created to avoid any cost changes and to control budgets. Strict and inflexible KPI. Adaptable for use with different products and processes. Customizable, easily improved (changed). Flexible, adjustable to customer needs. Accurate, predictive, automated. The supply chain is controlled at every step and often reaches beyond the company's scope. Innovation leaders Service leaders Price leaders Staff Processes Technology
  • 14. Plans and the reality You should be planning for surprises!
  • 15. Why does Murphy sometimes win? The main reason for the failure of most plans is the human factor Communication: lack of management skills to deal with problems, conflicts, crises Lack of accurate information Time pressures The need to compromise Uncertainty about the future, human panic factor
  • 16. Reacting to changes Changes are a guaranteed risk, which needs to be managed 4T Treat Transfer Tolerate Terminate