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1Date: September 2010IMPERIAL Logistics ©
Procurement Organizational Design
SIG Forum PresentationSEPTEMBER 2010
Agenda
1. What is the ‘Procurement Function’
2. The Procurement Model
3. Organizational Design
4. Procurement Roles
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4. Procurement Roles
5. Skills Requirements
The Procurement Function
COMPRISED OF:
• STRATEGIC SOURCING
• BUYING OPERATIONS
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The Procurement Function
STRATEGIC SOURCING is a corporate/institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company. It is one component of supply chain management.
The steps in a strategic sourcing process include:
– Assessment of a company's current spend (what, from who, qty)
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– Assessment of the supply market (who offers what)?
– Development of a sourcing strategy (where to buy what, while minimizing risk and costs)
– Identification of suitable suppliers
– Supplier Engagement (products, prices)
– Implementation of new supply structure
– Track results and restart assessment (continuous cycle)
The Procurement Function
BUYING OPERATIONS
• ‘the replenishment of goods and services on a repetitive
basis. This activity is most often governed by a formal
agreement which is an output of SOURCING activity.’
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agreement which is an output of SOURCING activity.’
• ‘Procure-To-Pay’
The Procurement Function
WHY BOTHER?:
• STRATEGIC SOURCING
– Realise commercial benefit (SAVINGS)
– Manage risk
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– Manage risk
• BUYING OPERATIONS
– Process efficiency
– Cost and Service Level
Value of Procurement
Profit Centre: NOT only a Cost centre
• Spend on goods and service ranges between 30% and 80% of total revenues
• Savings on spend fall directly to the bottom line
• A 10% to 20% saving on spend has the same effect as a 50% to
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• A 10% to 20% saving on spend has the same effect as a 50% to 100% increase in revenues?
What Comprises ‘Structure’?
�The Procurement Model
�The Organizational Design
�Roles
�Skills Requirements
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�Skills Requirements
What Comprises ‘Structure’?
The Procurement Model
– Centralized – total control
– Decentralized – total faith/disinterest/necessity
– Centre-led – Strategic ownership
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– Centre-led – Strategic ownership
Drivers of ‘Procurement Model’
CENTRALIZEDRisk Management
Order Fulfillment/SLA
Cost Mgt Requirements The Procurement Model
STRATEGY & INTENT
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Supply Capability / Coverage
CENTRE-LED
DECENTRALIZED
Risk Management
Skills Availability
Supplier Management
Social Responsibility
Leverage
7
High
Bu
sin
ess
imp
ac
t/
Re
lati
ve
Va
lue
6
14
Strategic
4
Wave 1 Commodities
All Commodities
Drivers of ‘Organizational Design’
The Organizational Design
– The maturity of the procurement function
– The authority at centre – Mandate
– Commodity Profiles
– Ownership defined by geographic range
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Non Critical Bottleneck7
Low
Bu
sin
ess
imp
ac
t/
Re
lati
ve
Va
lue
Supply Chain Risk/ComplexityHigh
15
4
5
98
10
3
2
– Ownership defined by geographic range
– Ownership defined by commodity
– RACI – Responsibility, accountability, consultative
requirement, Informative requirement
– Policy and other protocol
– Technology
– Performance Measurement
SENIOR MANAGEMENT
EXECUTIVE OPS / FIN
SCM/CPO
COMMODITY MGR 1
COMMODITY MGR 2
BUYING OP’S MGR
COMPLIANCE MGR
SUPPLIER DEVELOPMENT
Drivers of ‘Organizational Design
HEAD OFFICE
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OPERATIONS
STAKEHOLDER
MGR 1
CFST CFST
MGR 2
CFST
OP’S MGR
BUYERS
EXPEDIATORS
ADMINISTRATORS
MGR
CONTRACT MGT
REPORTING
DEVELOPMENT
SUPPLIER MGT
BEE
SCALESOURCING
REGIONAL/COUNTRY PARTICIPATION
Operations Manager
Supply Chain Manager
Head Supply
Chain
Management
Drivers of ‘Organizational Design
COUNTRY/REGION/BRANCH
REPORT TO HO
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Procurement Manager
Buyer 1 Buyer 2Supplier
Development Specialist
Logistics Manager
Senior Inventory Controller
Junior Inventory Controller
CFST Membership
NB! The Logistics Manager Position may not be justified in every country
Drivers of ‘Role’ Definition
‘Role’ refers to the requirements associated with a position
in terms of:
• Ownership/Responsibility
• Deliverables
• Reporting lines
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• Reporting lines
Drivers of ‘Role’ Definition
Typically defined by:
• Mandate – muscle/importance
• Scale – how much of what and where
• Complexity – process, politics, commerce
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• Complexity – process, politics, commerce
• Technology – enablement
Operational ‘job descriptions’ are the next level.
Drivers of Skills Requirements
Skills Requirements are defined by:
• Role
• Content
• Industry
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Skills requirement definitions are important in order to:
• Make the correct investment
• Formalize development plans
Questions
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17Date: September 2010IMPERIAL Logistics ©
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