Strategic Purchasing

Strategic Purchasing

Write a paper describing strategic purchasing and the main elements of a strategic purchasing plan, and provide
an example of a strategic purchasing endeavor.

Competency 1: Construct a procurement management plan that reflects the project’s procurement needs.
0 Explain the procurement department’s expected strategic goal.
Competency 3: Apply the process of sourcing a product or service.
0 Define the term strategic purchasing.
0 Describe the main elements of planning a strategic purchasing plan.
Competency 7: Communicate effectively.
0 Communicate effectively in a professional manner consistent with the standards and conventions of

Strategic Purchasing
What Counts As Strategic Purchasing?
Strategic planning procurement is a commonly used term. You may think all purchasing activities are strategic, but this is not the case. Purchasing office supplies or general hardware items, for
example, is not considered strategic.
What is strategic procurement? It is the ability to understand demand and adequately and precisely forecast demand. This is where risk can play a major role. For example, you have forecasted 10,000
laptop batteries from a vendor in another country. It is critical to understand all possibilities where delay may play a factor. Did you order enough; did you account for dead on arrival (DOA); and
did you account (unfortunately) for pilferage? More importantly, how do you forecast a product that has yet to be manufactured or even developed? How would you forecast this key deliverable?
Purchasing Strategies and Forecasting
Developing demand and forecast procurement strategies is important to a business. There are many purchasing strategies available to a buyer: forward purchasing, speculative purchasing, just-in-time
purchasing, and supplier-managed purchasing, to name a few. These strategies are limited only by the nature of the product or service being procured.
Purchasing activities include dollar averaging, spot buys, hedging, and so forth. There are many processes and methods of executing a strategic purchasing plan. It is important for the procurement
professional to understand all the methods at his or her disposal to optimize the life cost of a product or service. One of the most difficult functions is forecasting. Do you agree to a long-term
contract on a material at 10 dollars a pound? What if the price drops to 7 dollars a pound and you are committed to the higher price for the next 2 years? What if the opposite occurs? Is it all
skill, or is luck sometimes involved? Is a fixed contract a good idea on a product or service that is considered volatile?