To fulfill the missions assigned to the purchasing department (buying products, services, or solutions under the best market conditions…), a purchasing strategy must be established. Without a strategy, a successful supplier relationship cannot be expected, and the department will likely be at the mercy of events within those relationships.
The purchasing strategy
The purchasing strategy is guided by the pursuit of the function’s greatest contribution to the company’s overall competitiveness. Furthermore, it is fully aligned with the general strategy and focuses on the following points, which constitute complementary areas of action:
• establishes and validates purchasing-specific objectives;
Establish the objectives and action plan specific to the purchases
The aim is to synthesize company objectives and translate them operationally across all managed purchasing categories.
While easy to say, doing it is a lengthy and relatively complex exercise. Indeed, objectives must be translated into concrete terms based on available resources as well as numerous constraints (market trends, operational emergencies, required and available performance levels, etc.). In practice, this will involve following these steps, some of which may already have been established:
• Collect historical expenses by supplier (and if possible by item/service)
• Establish a consistent segmentation for all expense categories. Specializing in Trading: Analyze sales strategy (needs/constraints/trends)
• Analyze the supplier market by type using Porter’s Five Forces
• Create a Kraljic matrix for each segment (family and/or type level)
• Create a SWOT analysis for each type
• Generate and evaluate improvement initiatives based on given objectives
• Create an Effort/Benefit matrix for each type
• Develop a detailed action plan with a schedule, indicators, and reporting
Supplier policy
Our company’s supplier relationship policy is geared towards fostering supplier loyalty. To achieve this, the long-term relationship created by this policy must be managed using a performance measurement system for the existing and future supplier panel.
The communication policy
It operates on two levels:
• Internally, the purchasing department is a key forum for discussion where various stakeholders within the company can participate.
• Externally, the purchasing department implements all necessary measures to ensure the company projects a strong image of ethics and competence in the field of purchasing.
Human resources policy
In today’s economy, the act of purchasing has become complex, and therefore the profiles of those working in this field are constantly evolving. The required skill level for this profession is increasingly high; we’re looking for a rare breed: someone capable of being analytical, communicative, a leader, a negotiator, and comfortable in technical, financial, legal, and quality environments.
Therefore, a development plan must necessarily be built with each member of a purchasing team in order to meet all these challenges.
Supplier quality policy
• The organization must ensure that the purchased product meets the specified procurement requirements.
• The type and extent of control applied to the supplier and the purchased product must depend on the impact of the purchased product on subsequent production or the final product.
• The organization must evaluate and select suppliers based on their ability to provide a product that meets the organization’s requirements.
• Selection, evaluation, and re-evaluation criteria must be established.
Purchasing ethics
It is structured around three main axes:
1. Establishing rules and procedures
Corruption is a risk in the purchasing function environment, hence the need to put in place rules, charters and procedures, in order to bring more transparency and maintain the trust of suppliers and customers.
A code of ethics must be formalized with the following founding principles:
• supplier evaluation and selection,
• upstream supplier involvement,
• communication and information exchange with suppliers,
• intellectual and industrial property,
• frequency of supplier consultations,
• contracting principles,
• main contractual clauses,
• principles for challenging suppliers,
• procurement policy,
• general terms and conditions of purchase.
2 . Relationship with suppliers
Fairness must be ensured between suppliers throughout the procurement process:
• submission of similar files,
• similar requests for information,
• equal access to information,
• identical negotiation process,
• summary of contacts, offers, and negotiations for each case.
3. The ethical charter
Purchasing ethics encompasses all the rules of conduct that we impose on ourselves or our suppliers. This document, distributed to all stakeholders in the supplier relationship, describes not only purchasing procedures but also sets out the ethical rules to which they must adhere.
Transparency is as important as integrity and responsibility. The core principle of the code of ethics is to reiterate certain rules of good conduct. The purchasing department is committed to ensuring these preventative measures are respected.
Some fundamental rules of the charter to be respected:
• Avoid contempt and cynicism towards suppliers and subcontractors,
• Customer/supplier relationships are established over the long term after numerous and sustained mutual efforts,
• These relationships are constantly reassessed through economic and technical vigilance,
• Work for the long term and avoid short-term gains that may seem gratifying but jeopardize the future of the relationship,
• Keeping your word and demonstrating honesty are attitudes that ensure the longevity of relationships,
• Do not build the prosperity of your company on the ruin of others.