The purchasing organisation; strategy V) Strategy development for a sustainable value add

Recently I issued a set of articles about personnel requirements in a purchasing organization. Once these are hired the development and maintenance of a sustainable value-strategy is compulsory. To create such a strategy a classical approach can be absolutely sufficient. Discuss and fix the objectives within a framework of visions and ethics. Then the application of reverse tracking of the necessary activities to achieve the objectives. In the purchasing organization the leading indicators are always savings, cash generation and the containment of all possible risks. Further there might be also innovation goals or a target in transactional performance.

Once organised in an effective manner, a relatively small team of purchasing experts can generate a considerable gain on value for a business.

The main task during the strategy process will be the definition of the most valuable projects and a follow up on policy deployment for a straight implementation process of the strategy.

Derived by the mission and vision of the company as a whole the purchasing team will create an own vision statement to catalyse the strategy implementation process. The vision statement should describe in brief the policy of the purchasing organization starting with the employee goals, the value creation goals and the environment in which these processes are performed (like i.E. team spirit, sustainability, decision making and so on). All further statements within the strategy process need to be checked against this statement. A violation should not be accepted by the team.

According to general management rules there is a set of levers in every business model which define the fields of acting. There are many systems available in the management literature. In my business environments of the past I made the experience that the criteria and the question catalogue of the EFQM model is a good base to start. This model offers 5 business enablers:

Strategy

Leadership

People Management

Ressources and Partnerships

Processes, Products and Services

Behind these headlines are a set of questions to answer about the setup of any possible business. I found a good feasibility of this system to tune the purchasing processes.

To start with your strategy development, you should evaluate the state your organization is actually in. To do this a comprehensive assessment would be necessary. This can be done by putting a group of good experts and supporters together and intensively let them answer and evaluate the EFQM enabling question set. To perform efficiently the border conditions towards the questions and the organizational frame, you are in should be defined properly. Among the strategy team should be the agreement, that the performance goal for all levers shall be ambitious and evenly distributed to the enablers.

After the assessment it becomes transparent where to focus the strategical work to first equalize the strength of the 5 enablers and second force the level of performance towards higher ratings in all the 5 levers.

For most organizations this is an extremely challenging task. The quality levels proposed by EFQM standards require a highly visionary approach towards process excellence. A basic competency for this exercise is a comprehensive knowledge of all customers and the purchasing related processes and interfaces within the focus of the strategy. In terms of personnel management and leadership EFQM Benchmarks are world class.

Now it can be the time for a SWOT analysis to isolate the strengths and the weaknesses even further. This exercise can be very helpful to focus the available forces to the really important tasks.

The next step within our strategy storyline is the so-called creative expansion phase. A kind of open brainstorming to get an overview of all possible tools and applications to push the system forward. To be efficient you should apply some standard methodology of brainstorming with a combination of individual work phases and group-wise interacting phases. The team needs an open mind-set as precondition to propose many possible activities to improve the business. The result will be a listing of all possible solution paths and project work. When necessary further explanations are to be applied.

In a second session the restrictive contraction needs to be performed. A reduction of the options to the doable by prioritizing, interpretation and combination of solutions. Ideal result can be a set of tasks – already scheduled over the strategy period.

As actual performance was mirrored against the enablers during the assessment we may use this system to organize our policy implementation. There are many templates available for policy deployment. Personally I like the Hoshin-Kanri approach where the action plan is derived graphically from the most important overall goals. The matrix shows clearly how the singular actions are derived from the strategical focus.

Once finished it is up to the management to implement all the necessary measures and start a promotion programme in favour to the strategy development.

In the next issues I will tackle the levers for a perfect purchasing strategy.

Bernhard Rau, Mettmann, 22.2.2017