the european institute

© EIPM 2011– All rights reserved

THE EUROPEAN INSTITUTEO F P U R C H A S I N G M A N A G E M E N T

Purchasing Strategy

R’’evolution”

Frédéric Schwaller

Paris X-Achat 28th March 2011

© EIPM 2011– All rights reserved2

Sponsored by:

EIPM foundation in December 1990

Created by companies for serving companies:

Aérospatiale

Alcatel

Amae

Bull

Cerestar

Herberts

Nokia

Pechiney

Philips

Renault

The European Union

The region Rhone-Alps

The Haute Savoie Department

© EIPM 2011– All rights reserved3

The EIPM Today

• The EIPM is a companies driven school

• The EIPM is a school managed as a company

• The EIPM is a School for executives specialised in

Purchasing & Supply Management

• The EIPM leads Research activities, Education and

Trainings

• The EIPM holds the MBA accredited by Association of

MBAs

• The EIPM trains every year more than 4000 participants

in 9 different languages


EIPM Global Coverage


What is Strategy … ?!?!?

Michael E Porter & Peter Kraljic

• Purchasing&Corporate Strategy alignment

• Purchasing Organisation & Talents

• Tools to define a Purchasing Strategy

The past years Purchasing Strategy

« R’’evolution’’ » HCM ? CSR ?


Methodological Approach

• Strategic Mapping :

Portfolio Analysis – Porter 5 Forces

Kraljic Matrix Evolutions

• Levers or Tools :

E-Tools – Long and Short term Contracts-

Negotiations-SRM-IPO’s-PC Cards-M&A-

SLA’s-


COMPANY STRATEGY

Risks (& costs) reduction

Adapt offer / Innovate

Rationalize / simplify platforms

Reduce costs to secure the

profits

Encourage supplier

innovation to support

customer offer adaptationDifferentiation

Market shares /

NBI

A Purchasing Strategy to support

Company Strategy

Purchasing Strategy

Support

adaptation

efforts through

supplier

innovation• Technology watch

• Supplier involvement

• Supplier innovation

• Sustainable

development levers

Extensive customers needs coverage

(Diversified economic model)

Procurement Inputs

Reduce costs• Bundling

• Competition

• Negotiation

• Specifications

• Standardization

• Demand

Red

uce risks

•Key suppliers m

apping

•Supplier risks m

onitoring


Autonomy - Flexibility

Purchasing Organisations

+

Eco

no

my o

f S

ca

le(1)

(3)

(2)1 2 3Companies

Product

Project

(4)1 2 3Companies

(5)

Location

Act.

Centralisation

Coordination

Decentralisation

One Location Multiple Locations

-

+


New Purchasing Organisations

• To master design risks, to minimise costs and to serve as

the purchasing interface

• Transversal organisation project or delocalised in the

design centres

• Engineers / Technical aware of costs

• To optimise the best design choices, to buy thanks to a

suppliers market knowledge

• Centralised and delocalised organisation

• Purchasing Group Leader with a perfect market approach

• To master the continuous flow in the supply chain

• Delocalised structure (plant)

• Logistics

Upstream Purchasing

Engineer

Sourcing Expert

Purchasing Agent

Supplier Account Manager

• Supplier's data co-ordination

• Dependency analysis

• Negotiation


Analysis of the supplier market

Porter 5 forces – how « difficult » is the market

Suppliers

New

Entrants

Customers

New

Substitutes

Supplier

Market

Barriers

• Legal

• Economical

• Technological

• Political

• Environmental

Low Overall

Market difficulty Hight

TRENDTomorrow

Today


Peter Kraljic Model How to build a

strategy per category ?

Business Impact & Criticality

Low

Supply>Demand Supply<Demand

Market Difficulty

Supply risk

II

Leverage

I

Routine

IV

Strategic

III

Bottleneck

High

High

Low

KPI & Weight

KPI & Weight


Creating Value towards Strategy

• Measurement of Strategic Value Creation : KPI’s

• Security (Contract, Delivery, Quality)

• Costs ( Secured Market Price)

• Innovation ( Technology-Product-Process)

• Sales (New Product Launch)

• Ergonomy (Ease of use)

• Delivery ( Leadtime Packaging)

• Environment (Carbon Footprint Reduction)


EIPM Annual Conference Archamps December 2010 :

360° Change on Strategic Focus

‘‘Value Creation’’

• Axe 1: Bottom Line

• Maintain & Develop with CSR & Sustainability

Savings Measurement

• Axe 2 : Top Line Growth (Sales Growth)

New &additional indicators (KPI’s)

People- Innovation-Services-Products-

Environment-Organisation


Panel Discussion

What are the differentiators within Purchasing Sectors

Strategies writting & implementation ?

• Purchasing Strategy in Construction (SLA& EPCM)

• Purchasing Strategy in FMCG & (Retail)

• Purchasing Strategy in Insurance & Banking (Services)

• Purchasing Strategy in Raw Materials (Commodities)

• Purchasing Strategy in IT/Telco


Conclusion : A Winning

Purchasing Strategy

• Purchasing Strategies Integration and

alignement with Corporate Strategy

• Organisation & tools

• Differentiated Purchasing Strategies

• From implementation to Purchasing

Contribution & Function Recognition

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