Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
11
CHAPTER 2
Strategic procurement and supply chain
management
Objectives of this chapter
• To explain the growth in the strategic role of procurement, purchasing and supply
• To explain the concept of strategic management
• To identify various forms of purchasing strategy aimed at gaining competitive
advantage and to examine influences on strategic choice
• To examine the issues of how decentralised v. centralised departmental organisations
and support services affect the structure of the purchasing team
• To appreciate the importance of purchasing within the organisation’s structure
• To consider the placing of purchasing in various types of organisation
• To consider the central role of contract management in the virtual organisation
• To identify the supply chain concept and to consider alternative ‘supply chain’ models
• To explain why it is important to be involved with the total supply chain
• To follow the supply chain concept, investigating events from the primary supplier to
the ultimate user
• To identify the relevance and importance of ethics in the supply chain
• To highlight the areas of environmental concern
List of Cases, Research Boxes and Figures in this chapter
Case Studies
Nil
Research Boxes
CIPS Supply Management – highlighting the rise of procurement as the accepted name for the
buying and purchasing function.
Figures
• Figure 2.1 The scope of the purchase function
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.
13
© Pearson Education Limited 2015
• Figure 2.28 The value stream of a soft drink can
• Figure 2.29 Convergent and divergent elements in a supply chain
• Figure 2.30 Types of supply chain (Source: Based on Hughes et al., 1999)
Teaching Notes
All organisations need to plan for the future; this requires the development of frameworks to
allow the process to take place. Once strategic objectives have been agreed, the strategies
themselves can be formulated.
It is essential that all business functions, including purchasing/procurement, are involved in this
process. In the past, the function has tended to be involved in day-to-day operational activities,
and has not always made the contribution to business that it is capable of.
It has become involved in both tactical and strategic decision making in today’s successful
organisations.
In this chapter, we will also examine how organisations structure their purchasing activities. The
more developed the activity is, the more likely it is to be fully integrated with the rest of the
organisation. There is no one ‘best’ type of organisational structure for purchasing, and supply
structures that were appropriate five years ago may not be appropriate now. Strategies alter to
meet these changes, so organisational structures will also need to be modified.
In this chapter, students will be exposed to purchasing/procurement organisational structures in
the different sectors and will see that organising the activity will obviously be influenced by the
type of organisation concerned, and the ‘culture’ that permeates it.
In particular, it should be pointed out to students that once products and services have been
allocated to different groupings, then Category management can be implemented.
This requires the acknowledgement of the fact that differing Categories will require a range of
strategies according to the characteristics of the product (i.e. criticality, spend) and the
exigencies of the respective market environments.
Key concepts for such strategic analysis are as follows:
• Mission statements
• Strategic analysis, choice and implementation
• Product Life Cycle (PLC)
• Porter’s Five Forces
• Boston Consulting Group (BCG) – Portfolio Analysis
Another key concept introduced in this chapter is that of the supply chain.
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.
