Should the procurement strategy be aligned with the company strategy?

procurement strategy
July 2nd, 2019
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Precisely this question was discussed by experts at the presentation of the results of the Baromètre des Décideurs Achats 2019 (procurement decision makers barometer). According to large organisations, it is essential to align the procurement strategy with that of the company in order to make the organisation more competitive and optimise risk management.

However, the answer is more mixed among small businesses.

Their priority is not to align strategies but rather to promote the procurement department among internal stakeholders, while raising awareness of the department's role.

Procurement strategy: The disparity between large and small businesses

In most large companies, the procurement strategy is aligned with the company strategy.

At Rockwool, for example, this approach can be seen in the contributions made by the procurement department to the objectives of the operational department. The procurement department's input is based around five focus areas:

- Sustainable development

- Safety and security

- Growth

- Operational excellence

- The factory of the future

At Endel Engie, the strategies have been aligned by reorganising the group. By adopting one organisation per region (rather than per line of business), the procurement department aims to build more links with its internal customers.

Procurement departments in small businesses are not as developed, meaning that the procurement strategy may not always be aligned with the company strategy.

The role of buyers is often overlooked. Procurement departments rarely formalise their procurement strategy or their key performance indicators. Their priority is to increase other departments' awareness of their role and the value they can add.

The procurement strategy and the company strategy: Why should they be aligned?

Given that their primary function is to further the aims of the business, the procurement department must contribute to two of the company's main focus areas:

  • Giving the company a competitive advantage

Companies must no longer rely solely on their sales or production departments to develop their business by differentiating it from others' in their market.

The procurement department should also make a crucial contribution in this area by implementing a procurement strategy that prioritises finding innovative and competitive suppliers. With such a strategy, companies can develop products of better technical quality and with a reduced social or environmental impact by collaborating with partners better suited to these endeavours.

  • Managing risk

Managing supplier risks, whether they relate to logistics, finance, legal matters, quality, standard compliance, the company image or CSR, is a key factor in a company's success. In this context, the procurement department must put a strategy in place that safeguards supply and supplier relations, and therefore the work of 75% of procurement professionals focuses on these areas[1].

In conclusion, the procurement strategy must be harmonised with the company strategy.

All the experts agree on one thing: The best way to bring the procurement strategy in line with the company strategy and thus further the company's strategic aims is for the procurement department to be represented on the Board of Directors or Executive Committee. Procurement representatives currently hold an executive role in approximately 57% of French companies1, which is one step further towards optimising the profession's strategic positioning.

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