Academic journal article Journal of Purchasing & Materials Management

A Strategic Approach to Procurement Planning

Academic journal article Journal of Purchasing & Materials Management

A Strategic Approach to Procurement Planning

Article excerpt

A Strategic Approach to Procurement Planning

For the past decade the philosophy of strategic planning has been in its ascendency. During the 1980s it is likely that increasing demands will be placed on the strategic planning process.

Although entrenched deeply in the minds of corporate managers and market planners, strategic planning concepts have diffused slowly throughout the organization to include the materials functions. Several recent articles1 have addressed the need to integrate purchasing more effectively into the typical firm's strategic planning program. While there are a number of compelling arguments for incorporating purchasing related information into a firm's long-range plans, it is clear that for a vast number of American corporations this action has not occurred. In some organizations corporate planners tend not to listen to purchasing people. One need only consult popular management texts dealing with corporate planning2 to find that topics devoted to procurement related strategic decisions are notable only by their absence! In other companies, an interchange between the two departments is missing because purchasing managers tend not to think strategically. Research3 suggests that many purchasing managers, even at the highest levels, frequently become mired in day-to-day procurement decisions and, as a consequence, cannot devote adequate energy to the long-range, strategic procurement needs of their companies.

Adamson4 builds a link between procurement and strategic planning and attempts implicitly to reserve a place for purchasing within the corporate planning infra-structure. Nonetheless, throughout his discussion of strategic planning he fails to make an important point which, unfortunately, is often overlooked by practicing purchasing managers as well. The point is this. While it is essential for management to take actions that match the firm with its environment, it is equally important to recognize that effective strategic procurement can have a profound impact on a firm's competitive stance in the marketplace.

The purpose of this article is two-fold. A primary objective is to sensitize purchasing managers to the importance of planning within the purchasing function. Second, through the development of a general model of strategic planning, this presentation establishes a foundation for a more comprehensive integration of procurement related information into the corporate planning process. Thus, the article advocates a two-step approach to the problem of combining procurement strategy and corporate plans. That is, before corporate level plans can be responsive to meaningful procurement related inputs, purchasing managers must first identify strategic environmental contingencies and assimilate these factors into their buying decision processes.

CORPORATE PLANNING--MYTHS

AND REALITIES

If strategic plans are to be developed, an organization must extend its view beyond those events and factors that are immediately controllable to those that are more distant, less predictable, second order consequences and chains of events. There is no question that over the past few years much of the environmental turbulence and uncertainty can be attributed to procurement related factors. Clearly, energy shortages, volatile supply situations, double-digit inflation, and recessionary pressures have hampered corporate efforts to plan and execute strategy. In many cases, such surprises have not given sufficient warning to permit advanced strategic planning. Indeed, these dramatic shifts in the ability to deal with the future have called into question several of the assumptions upon which traditional planning models are based.

Dispelling Conventional Wisdom

Ansoff5 concludes that the time has come for strategic planners to remove their blinders and cease scanning the environment from the market output side only More specifically, it is becoming clear that strategic planning must extend beyond product/market decisions to take into account social, political and resource strategies. …

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