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C Vision
Strategic Procurement
By:Rick Spair –Level C Practice Manager 
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Strategic Procurement Part One
A focus on strategic procurement is helping CIOs of large organizations improvebottom-line performance. Take the first step towards making procurement a competitiveadvantage for your IT department by assessing the strategic maturity of your procurement practices.
A Dynamic Field
Procurement's increasing importance is being driven by two economic changes:
Increasing competitive pressures are forcing companies to look atprocurement as a means of helping boost the bottom line. CEOsare looking for areas to cut costs, and streamlining procurementprocesses is a viable solution.
A lot of companies are doing more outsourcing. This makesprocurement decisions increasingly important to business vitality.There are numerous ways an effective procurement strategyimproves performance, including:
Eliminating maverick spending.
Streamlining operations.
Improving supplier relationships.
Increasing bargaining power with suppliers.
Strengthening supplier relationships.
Aligning purchasing decisions with corporate goals and objectives.
How Mature Are You?
Measuring an organization's procurement maturity involves assessing how close it is toachieving each of the aforementioned results. There are four levels of maturity: novice,intermediate, advanced, and expert. There is no relationship between company sizeand procurement maturity. Companies of all sizes are at various stages in thedevelopment of their procurement functions.
Maturity Assessment Guide
1.
Evaluate maverick spending in the IT department.
Talk tosupervisors and find out if unauthorized purchases are beingmade. If so, what kind of purchases? You may be shocked bythe number of purchases occurring outside of formalprocurement protocols. On the other hand, with no protocol in
 
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place, expect excessive amounts of maverick spending.Procurement maturity is typically characterized by the followinglevels of maverick spending:
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Level 1: Significant maverick spending.
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Level 2: Minimal maverick spending.
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Level 3: Virtually no maverick spending.
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Level 4: No maverick spending.2.
Examine your procurement processes and procedures.
Find your written set of procedures detailing the procurementprocesses for your company. If there is no documentation,does your company follow repeatable procedures? Or doeseach purchase result in an ad-hoc patchwork of steps?Procurement maturity is typically characterized by the followinglevels of procurement procedures:
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Level 1: Noprocesses or procedures.
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Level 2: Processes and procedures exist, but are notdocumented.
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Level 3: Processes and procedures are documented andimplemented.
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Level 4: Major procurement decisions are determined by amulti-function team.3.
Evaluate your relationship with suppliers.
Look beyondyour internal procurement processes and focus on how wellyou know your suppliers. Typically, the more information youhave about the people you do business with, the better therelationship. With no purchase information on hand, youcannot develop a partnership with suppliers and serviceproviders. With proper information, you can evaluate and ranksuppliers. Your procurement maturity level relates to your supplier relationships as follows:
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Level 1: No purchase information on record; need to asksuppliers for it.
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Level 2: Use supplier information to evaluate price, quality,and delivery.
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Level 3: Rank suppliers and develop strong relationshipswith select suppliers.
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Level 4: A supplier's percentage of business correlates withperformance ranking.4.
Assess your bargaining power.
Information also providesyou with purchasing leverage. To what degree do you leverageinformation about suppliers to increase spending power? Doyou coordinate purchases to increase leverage? Does your company possess strong negotiating skills? Your procurementmaturity level is characterized by your ability to leveragespending power:
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Level 1: Company spending power is not leveraged.
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Level 2: Major purchases are negotiated and coordinated toincrease leverage.
 
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Level 3: All purchases are coordinated and leveraged.
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Level 4: Supplier's cost-reduction ideas are brought to your company first.5.
Determine procurement's strategic alignment.
Experiencedbuyers understand the overall corporate strategy and theprocurement strategy. How many of your buying decisions areviewed as strategic decisions? Do you have a strategic plan inplace? Procurement's strategic alignment relates to maturity asfollows:
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Level 1: No strategic plan governing procurement.
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Level 2: Although no strategic plan exists, purchases arestrategically relevant.
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Level 3: Virtually all purchases are aligned with corporatestrategy.
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Level 4: Perfect alignment with company goals andobjectives.6.
Evaluate your buying experience.
Do your buyers receivetraining? Do they understand the strategic relevance of buyingdecisions? Do they know how to apply cost accounting to anegotiation? For example, do they know the differencebetween direct and indirect costs, as well as overhead? Your procurement maturity level with respect to buying experience ischaracterized as follows:
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Level 1: Limited buying experience; no training.
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Level 2: Buyer training program is in place.
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Level 3 & 4: Buyers understand strategic buying and theimportance of cost.
In Summary
A strategic approach to IT procurement can help cut costs and improve efficiencies. Thefirst step to taking a strategic approach to IT procurement strategy is assessing your current procurement maturity.
Strategic Procurement Part Two
Many enterprises have gained a strategic advantage by treating their procurement as astrategic function. Map out your procurement process and make sure it encompassesthese best practices.Strong procurement processes align purchasing decisions with corporate strategy,increase bargaining power with suppliers, and increase the value obtained frominvestments.The key is determining when to put procurement through a detailed process. The dollar value of the purchase is always a strong indicator of strategic relevance. For example,ordering all of office supplies from one supplier at predetermined intervals can increasepurchasing leverage. More obvious examples include replacing 50 CRT monitors with
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