last updated: 10th February 2015
- Strategic procurement is, perhaps, most obviously recognised by the reliance of the purchaser on a core group of excellent suppliers and the availability of accurate, timely information on expenditure with the supplier and, more importantly, by item and commodity type.
- Procurement exists as a specialist department, has a clear functional head and is perceived to provide a core business activity. It is involved with well over 50% of the institution's non-pay expenditure on goods and services. The procurement function will contribute directly to the institution's corporate strategy and have representation on its Senior Management Team.
- Excellent information technology support is the foundation stone for strategic procurement and, as a part of this, a common coding system is rigorously applied to all purchases to enable the detailed level of analysis of purchasing activity that a strategic procurement function requires.
- Procurement is set annual targets for reductions in the total cost of acquisition of purchased goods and services. These will include not only the normal purchasing objectives of quality, delivery and price but will also encompass whole life costs, storage costs and service disruption, amongst others.
- Procurement information is compiled to support negotiation for key purchases. Purchase planning plays a pivotal role in the annual business planning process. Detailed estimates of market inflation and cost reduction activities are supplied to Senior Management.
- Detailed strategies and development plans are documented and agreed for key suppliers and commodities. Supplier performance is monitored with regard to quality, service, cost reduction and innovation and this is used to compile vendor ratings for supplier comparison. Preference is given to higher rated suppliers and poorer ones are developed or de-listed.
- Procurement resources and activities are focused using a continually updated Pareto analysis of expenditure compiled from the supplier and commodity coding data. Procurement resource is concentrated on the high value and/or high risk items likely to contribute greatest savings or create the greatest cost pressure if allowed to increase.
- Procurement is supported by cost estimating and purchase research capabilities that allow the institution to model the expected cost of any purchase prior to entering the market place. In this capacity, procurement is involved at the very earliest stages of product or service specification. Buyers should expect to receive regular training on quality, legislation and negotiation techniques as appropriate.
- Relationships with supplier are regulated by documented procedures. Memoranda detailing clearly the requirements may be used, with standard terms and conditions of contract and long-term agreements covering the responsibilities and necessary performance of all parties. Model forms of these agreements are held and regularly updated.
Adapted from "Good Management of Purchasing: A Report by Ernst & Young for the Committee of Vice-Chancellors and Principles and the Standing Conference of Principals" CVCP 1994
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