Eskom Procurement Book 2015

PROCUREMENT AS A SUPPORT AND STRATEGIC FUNCTION WITHIN COMPANIES

4.4.1 DEFINE BUSINESS UNIT REQUIREMENTS

The business unit functional strategy acts as the driving force for organisational procurement strategies for the products and services procured by the business units within the firm. These are translated into purchasing goals and, from these, commodity strategies are developed for commodity families. The development of a procurement strategy is often carried out by commodity teams, i.e., teams of procurement professionals dedicated to the procurement of a specific commodity, or groups of commodities. Commodities are general categories, or families, of procured items such as fuel, office supplies, wood, cotton, etc. A commodity team is frequently formed from employees across the business who are familiar with the commodity being procured. The commodity team is responsible for developing a commodity strategy, which defines the details and action plans for managing the commodity [2]. The next step is to understand the relative of the product or service procured importance to the business unit objectives. This is typically achieved through a tool known as portfolio analysis. Figure 4.1 presents the Portfolio Matrix , a tool every supply manager should have in his or her tool kit. Presented in the timeless and classic 2x2 format, the matrix recognises that an effective supply organisation must apply a variety, or portfolio, of strategies and approaches given different supply requirements. The 2x2 matrix has been around for quite a while. This concept, although not this specific tool, was first articulated by Kraljic in his 1983 Harvard Business Review article titled Purchasing Must Become Supply Management [1].

4.4.2 DEFINE STRATEGIC IMPORTANCE OF ITEM AND/OR SERVICE PROCURED

Figure 4.1: The Portfolio Matrix.

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