What is procurement strategy

Procurement management

[s.a. Procurement marketing]

Procurement serves to maintain the supply of the input factors required for the operating processes that are not available in the company itself. Procurement management includes decisions about the supply of goods and services to consumers in the production facilities, which go beyond the individual case of need and are aimed at the (global) procurement markets. This includes the procurement of labor (Pawnahnarketing), of information (sources of information), of capital (financial sourcing), of rights, goods and services (material procurement) and the acquisition of technology (research and development).

The aim of procurement management is to ensure the highest possible security of supply in quantitative and qualitative terms. Supply risks should be limited to a manageable level and the highest possible supply economy, right through to price and cost-conscious global sourcing, should be guaranteed. With regard to the sources of supply, three alternatives can be distinguished:

1. Sourcing from local markets

2. Procurement from third countries in which the company does not have its own production facilities (delivery outside the company) 3. Procurement from the group of companies.

Differences between nationally and internationally active companies therefore affect

- the variety of procurement alternatives and

- the heterogeneity of the procurement market constellation to be taken into account.

Internationally active companies can use the cheapest procurement source abroad, but have to reckon with impairments in terms of security of supply - such as economic or political risks (Risfe Management) and export or import regulations (Local-Content-Politifj). In addition, there are technical, logistical and financial problems of the delivery, which in particular can call the reliability of the delivery into question, for example with a just-in-time procurement policy (] ust-in-time).

The organization of procurement in an international company is of particular importance because there are multiple division of labor and coordination requirements between the parent company and the subsidiaries or external international suppliers. Grochla / Fieten (1989, Col. 210ff.) Differentiate between three variants of the organization of international procurement:

1. Partial centralization of procurement tasks, e.g. procurement management by the procurement department of the parent company (ethnocentrically organized procurement management)

2. Controlled decentralization of procurement tasks, e.g. procurement management coordinating function of the mother in the decentralized procurement activities of the subsidiaries (polycentrically organized procurement management)

3. Formation of main task holders in the group, i.e. subsidiaries that have a particularly high demand for certain externally related material groups are made responsible for their procurement and sign all contracts with suppliers (geocentrically organized procurement management) on behalf of the group (Latd-Coun -try concept).

1. Characterization and classification The procurement management forms the core area of ​​the supply management (supply management). A classification or definition of basic terms and concepts of supply management is carried out using two dimensions:
(1) Dimension 1 differentiates between an acquisition-related (market-based level) and a physical supply management (internal and inter-company treatment).
(2) Dimension 2 differentiates between strategic and operational elements of supply management (see Figure 1):
The task of supply management is to procure all the necessary input factors and to provide them without friction for the users in terms of the so-called material management optimum. The material management optimum is understood to mean the provision of the material required for the production of goods in the required quantity and quality at the defined time in the right place and at the lowest possible cost. Procurement management includes all company and / or market-related activities that are aimed at making the goods required but not self-produced available to a company.
2. Operadve and strategic procurement tasks In contrast to the earlier view that purchasing and procurement have to carry out the specifications of other functional areas and are thus limited to purely operational activities (operational purchasing), the supply of companies with the ones for maintaining and Execution of the value creation activities assigned an important role in particular for the company result. In a pragmatic way, strategic and operational tasks can be concretized (see Figure 2):

3. Strategic procurement management The procurement of goods (material goods and services) requires the definition of strategic concepts for the respective goods categories. The strategic procurement management has the following design aspects: · Structural dimension: Procurement requires an efficient structural organization that is able to effectively carry out the internal coordination tasks between the users ("internal customers") and the external sources of supply. As part of supply management, procurement has a cross-sectional range of tasks. The implementation of suitable IT systems is also of structural importance. · Process dimension: An important strategic task to ensure sustainable efficiency is the implementation of high-performance process flows between the phases of requirement definition and after-buying activities. · Market dimension: The strategic challenge is to define the most effective designs for the procurement of goods, i.e. to decide between market transactions and vertical integration of suppliers or insourcing. · Supplier management: If a decision is made in favor of vertical integration, concepts for managing relationships with suppliers are required (Supplier Relationship Management, SRM). The logical structure of the strategic planning process in procurement can be shown as follows (see Figure 3):
· Make or Buy: The starting point for all strategic procurement decisions is the consideration of whether goods or services should be produced in-house or purchased from third parties. Where a company cannot achieve a significant degree of specialization and / or no volume advantages, publishers are required to work with more efficient companies. In essence, it is about using the (efficient) services available on the market. The content-related decision-making criteria for assessing the advantageousness of market reference or in-house production can also be found in the core of the strategically shaped outsourcing / insourcing decision. · Outsourcing refers to the decision in favor of the external procurement of input factors. However, there is usually no market per se for the goods in question, as these are product or Have process specificity. From a corporate strategic point of view, the aim is to reduce the vertical range of manufacture with the aim of reducing fixed costs and thus less sensitivity to fluctuations in demand; The risk of insufficient production capacity is shifted to the suppliers. Outsourcing is therefore also a sustainable means of increasing the adaptability and flexibility of companies. · Insourcing describes the strategic option of creating goods or services yourself. In particular, the supply of critical goods with low security of supply prompts companies to consider the option of in-house production. In this way, dependencies on suppliers with high market power can be avoided. In addition, know-how is built up that is intended to secure competitive advantages (safeguarding a technological lead). · Analysis of the properties of goods: The different goods-specific and market factors are decisive for the definition of a target-oriented procurement strategy. Formally, the so-called value-risk matrix is ​​suitable for this (cf. Arnold 1997, p. 89 ff.). The analysis of the two main factors, value of the individual goods (to be determined with the help of an ABC analysis) and supply risk (expert assessments of internal and external risks) enables goods to be positioned. This allows different strategic fields of action to be separated from one another. Risk management concepts should also be taken into account in this process step.
4. Strategic procurement programs (sourcing dimensions) On the basis of corporate goals and functional area goals, strategic procurement programs can be defined for each input factor. To this end, various strategic procurement elements and principles are sensibly combined with one another. The resulting sourcing concepts form the core of a procurement strategy. The most important sourcing elements can be differentiated according to the following feature dimensions (cf. Arnold 1997, pp. 93ff.). The possible combinations of sourcing concepts to form a procurement strategy are visualized using the “Sourcing Toolbox” (see Figure 4). The optimal procurement strategy (BS0,, t) for an input item can be described as a function of one characteristic of the named sourcing concepts: BSopt. = f (L, O, A, Z, S, W, E).

5. Strategic supplier management Strategic supplier management includes measures taken by a company to design and control exchange relationships with suppliers. The focus is on the selection of an optimal transaction design with regard to the procurement goals. A distinction must be made here between purely market transactions and relational and thus long-term relationships with individual suppliers. While the strategy for the procurement of standardized goods must be geared towards developing a broad supplier base, the focus is on the strategic direction of supplier management when purchasing highly specific goods (relationship management, supplier relationship management). Soft factors such as innovation potential, service and trustworthiness must be recorded and designed. Supplier-buyer relationships can be differentiated as follows with regard to the degree of intensity of the required cooperation:
(1) parts maker,
(2) production specialist,
(3) development supplier,
(4) Value creation partner. The intensity of the relationship also has a fundamental influence on the scope of the resources to be used for the implementation and coordination of the relationship. This applies to both the requesting and the supplying company. The respective procurement situation determines the specific nature of a supplier relationship. U.A. Supplier management includes the following measures: • Supplier selection and evaluation: In the case of a targeted, intensive vertical integration of a supplier (e.g. single sourcing, development services with life cycle contracts), this is an important strategic task. With this in mind, the assessment systems must be designed: On the one hand, it is necessary to expand from the ex ante point in time assessment to a continuous, future-oriented consideration, and on the other hand, the future potential of a supplier, e.g. its innovative ability, must be taken into account. · Supplier maintenance includes all measures that serve to improve the relationship of trust between supplier and buyer. · Supplier development refers to a whole bundle of measures for the active support of suppliers. In detail, this includes supplier support such as the granting of credit, advice from employees of the buying company, technological and financial assistance in expanding capacities and the introduction of new products or production methods. · Design of effective incentive systems to keep the supplier efficient despite the lack of market competition.
6. Strategic procurement controlling In order to bring about decisions, procurement management requires a suitable data and information base. This must be provided and maintained by procurement controlling. The operational activities of procurement controlling support the transaction-oriented optimization of procurement processes. For this purpose, meaningful key figures must be defined (e.g. number of suppliers, number of orders per employee). The main goals are to lower the process costs incurred in purchasing and to reduce the cost prices. In contrast, strategic procurement controlling is intended to make a sustainable contribution to improving corporate results. It forms a cross-sectional function across all procurement processes. In the case of make-or-buy decisions in particular, procurement management is dependent on strategic procurement controlling and its information services. For the cost comparison of the alternatives “in-house production or external procurement”, controlling must create the database for its own value-added processes (representation of the presumed production costs for this service). However, a comparison of production costs for in-house production with the costs of external procurement does not yet reflect the decision-making situation with sufficient accuracy. Rather, when determining the costs of a third-party purchase, it is necessary to include all cost factors that will arise in the event of a market transaction with a specific supplier. This approach of the so-called Total Cost of Ownership (TCO) thus also includes, for example, the costs of supplier acquisition (e.g. logistics, maintenance, disposal, termination of a supplier relationship, switching costs). Notes · For more detailed information on procurement strategies, see Cooperative sourcing, Demand tailored sourcing, Domestic sourcing, Dual sourcing, E-Applications-Strategy, E-Collobaration, E-Coordination-Concept, Factory-within-a-factory-Concept, Global sourcing, Individual sourcing, insourcing, internal sourcing, local sourcing, make or buy, modular sourcing, non-e-procurement, outsourcing, single sourcing, system sourcing. For the related areas of knowledge, see procurement logistics, category management, customer relationship management, efficient consumer response, purchasing controlling, e-commerce, electronic procurement, enterprise resource planning (ERP) systems, globalization, industrial management, logistics, material logistics, materials management, Econometrics, optimization, production management, process management, quality controlling, quality management, risk controlling, supply chain management.

Literature: Arnold, U. (1997): Beschaffungsmanagement. 2nd Edition. Schäffer-Poeschel: Stuttgart, 1997. Arnold, U .; Scheuing, E.E. (1997): Creating a factory within a factory. 82nd NAPM Annual International Conference,
4th-7th May, Washington 1997. Ellram, L. M. (1999): Total Cost of Ownership. In: Hahn, D .; Kaufinann, L. (Ed.): Handbook of industrial procurement management. International concepts - innovative instruments - current practical examples. Wiesbaden I 999, pp. 595-607. Essig, M. (2004): Perspectives of Supply Management. Concepts and Applications. Berlin, 2004. Müller, H.E .; Prangenberg, A. (1997): Outsourcing Management. Scope for action in outsourcing and outsourcing. Cologne, 1997. Stölzle, W. (1999): Industrial Relationships. Munich, Vienna, 1999. Wag, - ner, S. M. (2001): Strategic supplier management in industrial companies. An empirical study of design concepts. European university publications. Frankfurt 2001. Internet addresses: www.bme.de (Federal Association for Materials Management and Purchasing); www.beschaffen-aktuell.de (specialist publication of the BME); www.competence-site.de (competence network for managers and young professionals); www.ifpmm.org (The International Federation of Purchasing and Supply Management); www.ipsera.org (International Purchasing and Supply Education and Research Association); www.ism.ws (Institute for Supply Management).

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