Eskom Procurement Book 2015

PROCUREMENT AS A SUPPORT AND STRATEGIC FUNCTION WITHIN COMPANIES

these objectives and strategies. The three challenges above require managerial and strategic skills of the highest order if they are to be overcome [2]. 4.3.3 TRANSLATING PROCUREMENT OBJECTIVES INTO PROCUREMENT GOALS A major part of the strategy development process is the creation of strategic objectives, including for procurement within an organisation. Procurement, as mentioned earlier, has a major role to play in developing these objectives; the next step is translating them into concrete goals. Each objective must be translated into a specific goal or goals that become the basis for a commodity strategy development process. The types of procurement goals and associated objectives are shown in Table 4.1.

Table 4.1: Linking procurement goals to procurement objectives. Procurement objectives Procurement goals Reduce the overall number of suppliers.

Reduce the supplier base by 20% in the coming fiscal year. Reduce parts inventory supply to 15 days or less. Reduce the average number of quality defects by 150 parts per million on all materials received within one year. Reduce materials costs by 10% within one year. Qualify two new suppliers for all logistics services by the end of the fiscal year.

Reduce overall levels of inventory.

Increase quality of all products and services procured.

Reduce overall costs of goods purchased. Outsource non-core competency activities to outside providers.

The next step is to translate company-wide procurement goals into specific commodity-level goals [2].

4.4 PROCUREMENT STRATEGY DEVELOPMENT PROCESS In this section we cover the commodity strategy development process under the following headings: • Define business unit requirements. • Define strategic importance of an item and/or service procured (portfolio analysis). • Determine business/purchase requirements and conduct a market analysis. • Set goals and conduct a gap analysis. • Develop a sourcing strategy and set objectives. • Execute strategy. • Monitor results and review performance.

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