Objective 5: Develop Integrated Purchasing Strategies That Support Organizational Goals and Objectives

Perhaps the single most important objective for supply management is to support organizational goals and objectives. Although this sounds easy, it is not always the case that purchasing goals match organizational goals. This objective implies that purchasing can directly affect (positively or negatively) the long-term growth, revenue, and operating outcomes and plans of internal customers. For example, let’s assume an organization has an objective of reducing the amount of working capital across its supply chain. Purchasing can work with suppliers to deliver smaller quantities more frequently, leading to inventory reductions and lower working capital levels. Such policies will show up as improved performance on the firm’s balance sheet and income statements. In so doing, purchasing can be recognized as a strategic asset that provides a powerful competitive advantage in the marketplace.

Unfortunately, it is often the case that supply management fails to develop strategies and plans that align with or support organizational strategies or the plans of other business functions. There are a number of reasons why purchasing may fail to integrate their plans with company plans. First, purchasing personnel have not historically participated in senior-level corporate planning meetings, because they were often viewed as providing a tactical support function. Second, executive management has frequently been slow to recognize the benefits that a world-class purchasing function can provide. As these two conditions are rapidly changing, purchasing is being integrated within the strategic planning process in multiple industries. A purchasing department actively involved within the corporate planning process can provide supply market intelligence that contributes to strategic planning. Effective supply market intelligence involves the following:

• Monitoring supply markets and trends (e.g., material price increases, shortages, changes in suppliers) and interpreting the impact of these trends on company strategies

• Identifying the critical materials and services required to support company strategies in key performance areas, particularly during new-product development

• Developing supply options and contingency plans that support company plans Supporting the organization’s need for a diverse and globally competitive supply base