| Capability is often defined in terms of the capacity | | | | original Henry Ford plant used to make everything it |
| and ability that has the potential for development or | | | | needed, turning raw materials into components and |
| use. This means that to improve Procurement to | | | | then assembling those components into automotives. |
| reach the stage of excellence you need to | | | | Since then, organisations have specialised in specific |
| demonstrate or acquire certain abilities and then put | | | | activities to achieve economies of scale and to build |
| them to use. Here are seven of the abilities you | | | | up expertise. In some cases this may have gone too |
| need. | | | | far and so you should periodically review whether or |
| 1. Develop category strategies that are aligned to | | | | not it is better to do things in-house rather than buy |
| corporate value. A category strategy summarises the | | | | them in. |
| approach you will take to managing a related group | | | | 5. Implement technology that is aligned to supply |
| of purchased items. There are a range of possible | | | | chain management. One obvious technology solution |
| permutations of strategies that you can deploy. | | | | is e-procurement for turning requisitions into orders. |
| What you need to do is select the one that has | | | | But what about technology for collaboration? For |
| deliverables that can be clearly traced to the way in | | | | example, a retailer might collaborate with a number |
| which your organisation delivers value. | | | | of distributors in such a way that if inventory runs |
| 2. Select suppliers and manage them based on their | | | | low, levels are checked with each distributor in turn |
| strategic importance. Not all suppliers are in a position | | | | until one is found that has the right quantity and an |
| to help you meet your corporate objectives. Your | | | | automatic call-off is made. |
| supplier of office stationery, for example, is unlikely | | | | 6. Develop performance management systems that |
| to add as much value for you as a supplier of a | | | | integrate with corporate goals. Your organisation will |
| mission critical item or service. You need an | | | | have an integrated set of objectives or goals. If both |
| appropriate supplier management approach for your | | | | your suppliers and employees are going to contribute |
| tactical, preferred and strategic suppliers that | | | | to those goals then their personal goals should be |
| balances the potential value from them with the | | | | capable of being traced to one or more of your |
| management effort needed. | | | | corporate goals. So, for example, if your corporate |
| 3. Align processes to specific supply chains. The | | | | goal is to be "the lowest cost producer" then a goal |
| volume and degree of standardisation of the | | | | for suppliers could be the value of cost reduction |
| products and services you buy will dictate which | | | | ideas they have contributed. |
| process you should adopt to be efficient. For | | | | 7. Introduce demand pull systems and processes. One |
| example, commercial print services are best managed | | | | of the seven wastes of the Lean approach is |
| and produced with a job shop type of operation | | | | over-production. This means doing more than is |
| whereas a commodity such as sugar will require a | | | | necessary for the immediate future and comes from |
| continuous flow approach. The processes you use to | | | | decisions to batch work in some way. Demand pull |
| buy and schedule your needs should reflect these | | | | avoids this over-production by only requesting more |
| differing approaches. | | | | when it is needed and only in the quantities needed |
| 4. Develop a make versus buy perspective. The | | | | right now. |