The need for procurement to develop processes, which enhance an organization’s competitive position through strategic sourcing, is greater than ever. From this perspective, an effective sourcing process means more than simply promising maximum efficiency or lowest cost. Given the diversity of available strategies, an effective sourcing process is one that fits the needs of the business and strives for consistency between the internal capabilities and the competitive advantage, which is sought, as defined by the business strategy.
Strategy alignment means that procurement activities are consistent with the nature of the business strategy and makes a proactive contribution to marketing effectiveness.
The concept of procurement alignment with business strategy makes sense, but how does it happen?
Before procurement can align with business strategy, procurement managers must be able to translate business strategies into procurement goals. Goals and objectives differ across four major dimensions:
1. Time frame
Objectives are independent of time and open-ended, whereas, goals are time-based or time phased and intended to be superseded by subsequent goals. For example, when John F. Kennedy stated that the United States was going to send a man to the moon, this was clearly an objective. When he added that it would be done “by the end of the decade,” the objective became a goal.
2. Measurement
Quantified objectives are often stated in relative terms (i.e. with respect to another entity or organization). Goals are much more specific, stated in terms of a particular result that will be accomplished by a specified date. The objective that, “we will be the automotive company of quality,” is relative to other automotive companies. The goal that, “we will reduce defects to 1000 ppm,” is an absolute metric, which is the goal.
3. Specificity
Objectives are stated in broad, general terms, whereas goals are stated in terms of a particular result that be will be accomplished by a specified date. For instance, the statement, “we will be the best in customer satisfaction,” is a very broad statement and objective. The statement, “we will reduce warranty cost by 3% on part number xyz by the third quarter,” is more specific.
4. Focus
Objectives are often stated in some relevant external environment. Goals are internally focused and imply how resources will be utilised in the future. For instance, the statement, “we will be regarded by the public as an environmentally conscious company,” is externally focused. The statement, “we will invest 10% percent of our revenues in new environment-friendly technology,” is internally focused and states how resources will be used.
Each of these examples couples an objective with a goal. This is an important part of the strategy development process. Executives often develop very broad, sweeping statements regarding where a company is headed, what the overall mission is, and where it will be in the future. However, it is up to managers to translate these broad objectives into actionable, realizable goals.
The concept of procurement alignment with business strategy makes sense, but how does it happen?
Before procurement can align with business strategy, procurement managers must be able to translate business strategies into procurement goals. Goals and objectives differ across four major dimensions:
1. Time frame
Objectives are independent of time and open-ended, whereas, goals are time-based or time phased and intended to be superseded by subsequent goals. For example, when John F. Kennedy stated that the United States was going to send a man to the moon, this was clearly an objective. When he added that it would be done “by the end of the decade,” the objective became a goal.
2. Measurement
Quantified objectives are often stated in relative terms (i.e. with respect to another entity or organization). Goals are much more specific, stated in terms of a particular result that will be accomplished by a specified date. The objective that, “we will be the automotive company of quality,” is relative to other automotive companies. The goal that, “we will reduce defects to 1000 ppm,” is an absolute metric, which is the goal.
3. Specificity
Objectives are stated in broad, general terms, whereas goals are stated in terms of a particular result that be will be accomplished by a specified date. For instance, the statement, “we will be the best in customer satisfaction,” is a very broad statement and objective. The statement, “we will reduce warranty cost by 3% on part number xyz by the third quarter,” is more specific.
4. Focus
Objectives are often stated in some relevant external environment. Goals are internally focused and imply how resources will be utilised in the future. For instance, the statement, “we will be regarded by the public as an environmentally conscious company,” is externally focused. The statement, “we will invest 10% percent of our revenues in new environment-friendly technology,” is internally focused and states how resources will be used.
Each of these examples couples an objective with a goal. This is an important part of the strategy development process. Executives often develop very broad, sweeping statements regarding where a company is headed, what the overall mission is, and where it will be in the future. However, it is up to managers to translate these broad objectives into actionable, realizable goals.