From Company Strategy to Purchasing Strategy to Commodity Strategy

Kraljic Model
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Koen Vandermarliere
Business Consultant, Belgium

From Company Strategy to Purchasing Strategy to Commodity Strategy

The purchasing department is an important department in the company. As such it is a logical question to the Purchasing manager/director to define his purchasing strategy and communicate this to the board. What information is needed to build such a strategy?
Just like any departmental (functional) strategy the start is from the COMPANY STRATEGY, and vision. Purchasing is a supporting department and needs to support the primary goal of the company: supplying a product or service to paying customers.
Once you clearly know what way the company will go, you can define how the purchasing department will contribute. Examples can be cost reduction, innovation, limitation of risks...
Based on that direction you can define your PURCHASING STRATEGY towards securing supply, cost based re-engineering, Sourcing of new suppliers or techniques... This can imply different strategies for different material types. For example a company could be looking for pure cost reduction on Indirect purchasing and innovation on certain products in direct purchasing while for others securing supply is the main strategy.
Based on these directions set out in the purchasing strategy, the commodity owners can start to develop their COMMODITY STRATEGY. This commodity strategy will be the key to the development of the vendor management strategy for individual vendors or product strategy for products.
Every step and every level of strategy definition should be set up with the input of the relevant level of the internal Customer. This is sometimes forgotten in larger companies where staff services have the "ivory tower" view of things. The risk to do the right things on the wrong moments or to do simply the wrong things is the realistic.
And as that is contra productive it is not what we want to happen. This is why it can be important to look at a company like if it would be a small family business: First define the primary goal; what is it that the company does and makes money with? Then define the responsibilities of all supporting services and their direct links to the primary goal. The closer these are to that primary goal, the more critical they are to the company.
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