The document discusses the strategic role of procurement and supply chain management. It explains how purchasing has grown to be involved in strategic decision making due to factors like seeing purchasing as value-adding rather than just cost-reducing. It also discusses developing purchasing strategies that are integrated with corporate strategies and considering stakeholders in the purchasing process. Finally, it emphasizes that effective supply market strategies are based on in-depth analysis of supply chains to find opportunities for competitive advantage.

1. DR NAYLA H. Mohammed
MANAGING PURCHASING SUPPLY
RELATIONSHIPS
(Strategic procurement and supply
chain management)

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 To explain the growth in the strategic role of
procurement, purchasing and
 To identify various forms of purchasing strategy
aimed at gaining competitive
 To appreciate the importance of purchasing within
the organisation’s structure
 To consider the placing of purchasing in various
types of organisation.
 Identify stakeholders in the process of purchasing
 Identify typical requirement of external and internal
customer stakeholder .
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 A proactive strategic procurement operation
can give the organisation it represents a
competitive advantage by reducing waste in
the value chain.
 Purchasing strategies, however, cannot be
developed in isolation; they need to be
integrated with corporate strategy to
succeed
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The main reasons for the growth in purchasing
involvement in strategic decision making are as follows:
1. Purchasing is seen as an area for adding value, not
simply reducing costs.
2. Rapid product innovation requires a more integrated
management team
3. There has been a move to holistic views concerning
the integration of material and information flows, both
internally and externally.
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for example:
 materials requirements planning (MRP), manufacturing
resource planning materials requirements planning
(MRP), manufacturing resource planning (MRP2),
distribution resource planning (DRP), enterprise
resource planning
 (ERP) and integrated information systems associated
with e-commerce;
 supply chain concepts such as value streams, lean
and agile supply, and pipeline management.
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1. Awareness that active supplier involvement can increase
efficiency and effectiveness.
2. A developing recognition that concern with strategic costs of
supply and total cost of ownership, rather than short term
price, is important.
3. the growth and development of the Chartered Institute of
Purchasing and Supply (CIPS) in supporting the role of the
activity.
4. A recognition of the growth in purchased materials and
services.
5. Increased recognition of the profit potential in purchasing.
One of the major problems faced by the purchasing and
supply activity in
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Note: The examples are for the purpose of illustration only. A complete statement of the scope would be very lengthy, and
would vary greatly between one organisation and another.

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 Many organisations failure has been to take
on board a proactive strategic role.
 The work on a functional basis of purchasing,
finance and production.
 This type of approach has led to demarcation
disputes and sub-optimisation, i.e. each
function attempting to achieve its objectives
regardless of the others.

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 Definitions
 Strategy is the pattern or plan that integrates an
organisation’s major goals, policies and action
sequences into a cohesive whole
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In developing a strategy, the following need to be
considered:
 What are target objectives?
 How are target objectives to be achieved?
Strategy covers:
 moves and approaches which are ongoing;
 new actions in the process of being mapped out;
 innovation, risk taking;
 choosing among alternatives;
 doing the right things at the right times
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This involves management’s vision of what the
business is, or should be. Once established this vision
serves to:
■ shape the future direction the organisation should
follow
■ establish a strong organisational profile
■ identify core business.
Levels of strategy
If an organisation has successfully determined
strategies at various levels, those strategies should
operate together harmoniously
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Many procurement organisations are now
implementing category management.
 What is category management?
Continual monitoring of expenditures and
supplier performance in specific buying
categories with the intent of driving ongoing
cost or supplier performance improvements.
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Strategic management can be divided into three
major areas:
1 Strategic analysis – position facing the
organisation.
2 Strategic choice – formulation of alternative
courses of action.
3 Strategic implementation – planning how the
choice of strategy can be put into effect
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 Strategic analysis is to do with understanding the
relationship between different factors affecting the
organisation and its choice of strategies.
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In a large and diverse organisation, a prime concern
at the corporate level is achieving a balanced range
or portfolio of business activities. The Boston
Consulting Group (BCG) suggested a matrix analysis.
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This can best be assessed with SWOT analysis.
SWOT is made up of the first
letters in Strengths, Weaknesses, Opportunities and
Threats. It:
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Effective supply market strategies are based on
analysis, weighing up probabilities, defining strategies
and planning their implementation in detail. This
involves:
 1. Analysing the supply chains in order to find key
points at which competitive advantage may be
sought or threats exist.
 2. Understanding the potential impact of particular
strategic interventions upon the supply market; and
being able to conceive of the likely rearrangements
that may occur and how competitors may react
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1. SMALL SINGLE PRODUCT ORGANISATIONS
2. FLOW PRODUCTION,E.G. CAR INDUSTRY
3. MAJOR MANUFACTURING
4. PROCESS INDUSTRY
5. EXTRACTIVE INDUSTRIES,E.G. OIL, COAL
6. DISTRIBUTIVE AND RETAIL
7. SERVICE INDUSTRIES
8. THE PUBLIC SECTOR
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Supply chain management is concerned with the co-
ordinated flow of materials and services from origins
through suppliers into and through the organisation
and on to the ultimate consumer in such a way as to
maximise value added and minimise cost.
Associated flows of information and funds are also
included
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It is desirable that developing good practices and
concepts is implemented throughout the supply
chain by migrating these ideas both upstream and
downstream.
Some ideas that are pursued by those concerned
with supply chain management are:
1. reverse engineering;
2. value engineering;
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1. value adding relationships and negotiations
2. supplier integration
3. tiering of suppliers
4. value added chains
5. lean supply
6. agile supply
7. supply pipeline management
8. value streams
9. network sourcing
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Hughes, Ralf and Michels (1999) suggest that there
are several types of supply chain, and that relations
between different types of chain may be either
collaborative or competitive. Figure 4,5. 8 shows
diagrams adapted from their work that illustrate this
point
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 The supply chain concept in action
The value stream of a soft drink can
 Strategic development of purchasing
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