The process of aligning procurement goals with business objectives is especially important for procurement managers. These managers often face some very broad directives from corporate management, for example, to reduce costs or improve quality. The strategy development process takes place on four levels as outlined below.
1. Corporate Strategies
These strategies are concerned with (a) the definition of businesses in which the organization wishes to participate and (b) the acquisition and allocation of resources to these business units.
2. Business Unit Strategies
These strategies are concerned with (a) the scope or boundaries of each business and the links with corporate strategy and (b) the basis on which the business unit will achieve and maintain a competitive advantage within an industry.
3. Procurement strategies
These strategies, which are part of a level of strategy development called functional strategies, specify how procurement will (a) support the desired competitive business-level strategy and (b) complement other functional strategies (such as marketing and operations).
4. Commodity Strategies
These strategies specify how a group tasked with developing the strategy for the specific commodity being purchased will achieve goals that, in turn, will support procurement, business unit and, finally, corporate-level strategies.
Companies that are successful in deploying procurement strategies have achieved this because the strategy development process is integrative. This means that the people responsible for the implementation draft the strategy. Integrative procurement strategies occur when corporate strategic plans are effectively “cascaded” into specified commodity goals through a series of iterative stages in a sales and operations plan.
Corporate strategy evolves from corporate objectives, which effectively evolve from a corporate mission statement drafted by the chief executive officer (CEO), functional executives and the board of directors. The CEO takes into consideration the organization’s competitive strengths, business unit and functional capabilities, market objectives, competitive pressures, customer requirements and macroeconomic trends to craft corporate strategies. What distinguishes an integrative strategy development process is that business unit executives, as well as corporate supply chain executives, provide direct input during the development of corporate strategy.
These strategies are concerned with (a) the definition of businesses in which the organization wishes to participate and (b) the acquisition and allocation of resources to these business units.
2. Business Unit Strategies
These strategies are concerned with (a) the scope or boundaries of each business and the links with corporate strategy and (b) the basis on which the business unit will achieve and maintain a competitive advantage within an industry.
3. Procurement strategies
These strategies, which are part of a level of strategy development called functional strategies, specify how procurement will (a) support the desired competitive business-level strategy and (b) complement other functional strategies (such as marketing and operations).
4. Commodity Strategies
These strategies specify how a group tasked with developing the strategy for the specific commodity being purchased will achieve goals that, in turn, will support procurement, business unit and, finally, corporate-level strategies.
Companies that are successful in deploying procurement strategies have achieved this because the strategy development process is integrative. This means that the people responsible for the implementation draft the strategy. Integrative procurement strategies occur when corporate strategic plans are effectively “cascaded” into specified commodity goals through a series of iterative stages in a sales and operations plan.
Corporate strategy evolves from corporate objectives, which effectively evolve from a corporate mission statement drafted by the chief executive officer (CEO), functional executives and the board of directors. The CEO takes into consideration the organization’s competitive strengths, business unit and functional capabilities, market objectives, competitive pressures, customer requirements and macroeconomic trends to craft corporate strategies. What distinguishes an integrative strategy development process is that business unit executives, as well as corporate supply chain executives, provide direct input during the development of corporate strategy.
