This document discusses creating a procurement management strategy. It defines what a strategy is and explains the strategic planning process. This includes analyzing the current situation, defining generic business strategies and goals, and developing a strategic procurement management plan. It notes that plans may need to adapt to changes and that the human factor can sometimes cause plans to fail due to issues like a lack of communication or accurate information. Overall, the document provides guidance on developing an effective procurement strategy through analyzing the current situation and defining goals and plans while allowing for flexibility to adapt to changes.

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?
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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

18. vaidamaksims@yahoo.com
www.futureproofitable.com