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Procurement and the Competition: A Threat to Strategic Advantage

September 12, 2011

Something that really strikes me is the readiness of Procurement organizations to meet with each other and share information. With relatively few exceptions, I find most Procurement professionals consider it quite normal to contact others in their industry and exchange ideas and experience. They even work collaboratively to establish common views of ‘best practice’ in areas such as skills or RFX templates or commodity research.

For many in Procurement, ‘the supplier’ is the competitive enemy and true market competitors are often ‘friends’.

The comparison on the sell-side of the business could not be more stark. Competitors are companies which challenge for customers. Companies outside my industry are potential customers. I know who I want to speak with and with whom I will happily share information.

The point of these comments is to question whether Procurement should be re-thinking its readiness to consort with competition. If Procurement today truly is strategic (and I personally believe that it should be), then interaction with competitors should be carefully controlled. Equally, since having the best suppliers is one source of this strategic advantage, increased contact with the supply community should be encouraged.

Essentially, the focus should be on developing strong and differentiated supply chains – and that means beating others in your industry, not sharing with them.

3 Comments
  1. Profound point. I would make a caveat however, in saying that much or most of the typical supply chain does not comprise any competitive advantage, but is merely a form of hygiene. We can challenge the use of the term “strategic sourcing” when we are discussing optimization of a company’s office supply category, as this and similar activities will never be differentiating, and we can freely share much of this information in the spirit of collegiality without risk to our company’s positioning. However, when we are focused on structuring of those collaborative relationships that will enable us to get a better product or service to the market more quickly or more effectively than the competition, THAT is true strategic sourcing, and like other sources of strategic advantage, should be protected as a critical company asset.

  2. Profound point. I would make a caveat however, in saying that much or most of the typical supply chain does not comprise any competitive advantage, but is merely a form of hygiene. We can challenge the use of the term “strategic sourcing” when we are discussing optimization of a company’s office supply category, as this and similar activities will never be differentiating, and we can freely share much of this information in the spirit of collegiality without risk to our company’s positioning. However, when we are focused on structuring of those collaborative relationships that will enable us to get a better product or service to the market more quickly or more effectively than the competition, THAT is true strategic sourcing, and like other sources of strategic advantage, should be protected as a critical company asset.

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