Definition
Strategic
procurement is the development of a true partnership between a company
and
a supplier of strategic value. The arrangement is usually long-term
single-source
in nature and addresses not only the buying of parts, products, or
services,
but product design and supplier capacity. Partnering agreements allow
the
mutual exchange of confidential information, proprietary restrictions,
non-disclosure,
non-compete, certification of processes, routine audits, delivery
performance,
quality performance, as well as the transfer of control of a process or
product.
The relationship between partners is unlike the traditional adversarial
relationship between buyer and seller, where the buyer pits one
supplier
against another frequently during the year, focusing entirely on unit
cost. Under these conditions exists a mutual distrust between parties
that is
counterproductive to both. For the buying company, there generally
exists
an unleveraged multiple supply base that results in a competitive cost
disadvantage. For the seller, he is continually negotiating price
reductions at a disadvantage,
kept in the dark, expected to "jump through hoops" in an instance, and
generally
kept subservient to the buyer.
In a strategic procurement agreement both companies view each other
as equal partners, assisting each other with training, technical help,
and
developing a full trust. The buying company involves the supplier early
in the new product design cycle, allowing the supplier to bring its
expertise
to the table. Simultaneous engineering is routine, and cost savings are
generally shared for product or process innovations.
Within the buying company, procurement is elevated to the strategic
level and included in the long-term planning process. Strategic
objectives
such as part number reduction, supply base reduction and new strategic
agreements
are assigned to the senior procurement officer and the procurement
group
for achievement. The idea is to leverage the procurement organization
talent
and assets for a competitive advantage.
The Issues
The
biggest single issue in strategic procurement is "placing one's eggs in
a
single basket." Relying on a group of single suppliers requires that
each
supplier/partner has adequate capacity and is equipped to recover
quickly
from a sizable catastrophic event: fire, storm, flood etc., minimizing
the
risk and exposure of losses to the buying company.
Pragmatic Applications
The
purchasing profession has been treated as an afterthought in companies
for
far too long in U.S. business history. Leveraged properly, the
strategic
management of the company purse strings can result not only in
leveraged
cost savings, but also innovation in product design, kan-ban practices,
supply-on-location
deliveries, which can all result in improved quality and reduced lead
times.
However, just like anything else, strategic procurement is no panacea,
nor should it be undertaken as a fad or embraced as a religion. It is
an
operational strategy that, if implemented properly, will provide a new
dimension
to competing: quickly introducing new customerized high quality
products
and delivering them with unprecedented lead times, swift decisions, and
manufacturing
products with high velocity.
Our Approach: Tools from a Toolchest
Rockford
Consulting Group applies concepts and technologies as the situation
warrants,
that will result in the ultimate benefit to our clients. We treat
strategies,
technologies, and methodologies as tools in a toolchest, and use them
when
they offer practical solutions and achievable results. We believe that
each
client situation is unique, with its own unique set of solutions. (Please see our
procurement consulting services Procurement Consulting Services
)
Why Us?
Rockford Consulting Group can provide long-term assistance to many companies in a variety of industries. The firm has a cadre of the best management consultants in the world today, providing high quality professionalism through the use of experience and innovation.
We subscribe to the Institute of Management Consultants Code of Professional Conduct. All consultants engaged on projects adhere to its principles. Whenever possible we will use consultants certified in their particular specialty area. Certification assures that consultants have substantial prior experience in their specialty, and their competencies have been tested by the IMC, and verified by a number of clients. This assures our clients that we are assigning the highest qualified consultants in the profession.
We provide technical expertise, team facilitation, leadership, and direction in deciding how you will meet the challenge. We refer you to our Qualification Statement for further details on our background, areas of specialization, concepts and technologies applied, staffing, operating policy, approach, companies and industries served, case studies and references. Equally as important, we train our clients to sustain new methods of manufacturing and the consequential benefits over time. Your company will benefit directly from this training.
We have achieved an efficiency in our approach to assignments that allows us to provide high quality technical and managerial advice in a much shorter amount of time than could be accomplished years ago. We are able to do this because of the extensive consulting experience that each of our specialists has.
©1999 Rockford Consulting Group, Ltd.