Skip to content

Is there such a thing as ‘a Procurement strategy’?

September 16, 2015

Is there really such a thing as a ‘procurement strategy’ (beyond the initial make / buy decision), or is it rather a contracting and relationship strategy?

That is a question that IACCM has been posing – and indeed extending the question to sales strategy as well – so it is interesting that the same point is now being picked up by academics and researchers as they look at increasingly volatile and unpredictable market conditions.

Let me offer some background.

Today I conducted a webinar with Professor Rob Handfield, who teaches supply management at North Carolina State University and is the Executive Director of the Supply Chain Resource Cooperative. We were presenting to a large audience from the oil and gas sector – an industry where collapsing prices have caused rapid focus on issues of value efficiency and effectiveness.

Rob recently published a research paper on “The role of effective relationship management in successful oil and gas projects”. Some of the research was undertaken in conjunction with IACCM and the results were published in JCSCAN (the Journal of Strategic Contracting & Negotiation), available from the IACCM website. His findings point to the critical importance of contract management and its integration with key aspects of relationship definition and oversight.

Among the key points coming from the research are:

  • the need for earlier engagement of commercial resources
  • the importance of focus and definition of goals, objectives and their relative importance.
  • the critical issue of stakeholder inclusion and engagement.
  • the need for risk management to be integrated into performance management and to develop a practical and structured approach to handling risks.
  • the importance of engaging the right people, with the right attitudes and at the right time.

The chances of project failure were shown to increase if the parties simply rely on ‘the relationship’. Today’s business environment demands far better definition of performance and governance techniques. Therefore ‘informal, relationship structures’ such as frequent meetings, the sue of phone and email, just don’t work. Face-to-face meetings similarly can often be an excuse for lack of definition and discipline – and are therefore often associated with unsuccessful projects.

Success factors are associated with robust and well-defined contracts which offer defined approaches to goals, their oversight and governance. They are also linked to contracts with a contract management plan, where well-trained contract management professionals are deployed and where they are engaged early in the project. Performance measures must be few in number and relevant in form. Technology also plays a growing role – and the study confirmed that many of the procurement systems now in place have little or no relevance to project success since they are too mechanistic and generate little or no relevant data or analysis.

Returning to the opening sentence, once again we see evidence that thought leaders are seeing procurement (and perhaps soon also Sales) as a sub-element of the contract and relationship management process.

 

3 Comments
  1. Douglas Macbeth permalink

    Not sure if I agree totally. It seems to me that while relationships and contracts are everywhere there are some that are more important than other.s Key clients and suppliers on whom your business future depends need very careful treatment while other commodity types only justify minimal attention. This is the logic of the relationship portfolio. I would content that the purchasing strategy is about deciding which clients and which suppliers should be in which quadrant of the portfolio and then setting up and managing the contracts and relationships, accordingly.

    • Douglas, you are of course absolutely right – but have you not in fact confirmed the point? What you describe is the need for a relationship strategy – and then procurement tactics are driven by the relationship.

  2. Isnt Douglas saying that you need your procurement strategy first, and they your relationship strategy flows from this, as of course do your procurement tactics)?

    A good procurement strategy is about understanding the business context of what is being bought. Only with that insight should we be deciding upon the appropriate relationship and other tactics.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: