Strategic Procurement Management

Week 1: What is strategic about procurement?

Welcome to Week 1. This week we will explain the scope of the procurement function and begin to show how it is playing a strategic role in organizations and its importance in projects. 

In this Week we shall

• Consider key concepts in procurement including price, value, and cost 
• Reflect on how procurement decisions taken in your organization, or others organizations you are familiar with

On completion of this Week you will be able to

• Explain the strategic role of procurement 
• Explain the relationships between corporate goals and procurement strategies 
• Critically review the impact of procurement 

Lecturecast

In this lecturecast we will explain the scope of the procurement function and begin to show how it is playing a strategic role in organisations and its importance in projects

Reading

The reading this week focusses on the development of procurement, historically and current/future projections on how procurement still needs to change in light of the urgent climate crisis and related social inequalities. The reading encourages you to reflect on the opportunities for procurement to actively build supply markets that enable the circular economy to develop and to consider the role of procurement and innovation.

Required Reading

Cavinato, J. L. and Kauffman, R. G. (2000) The purchasing handbook. a guide for the purchasing and supply professional. 6th ed. McGraw-Hill.

Ellram, L.M., Harland, C.M., van Weele, A., Essig, M., Johnsen, T., Nassimbeni, G., Pagell, M., van Raaij, E., Rozemeijer, F., Tate, W.L. and Wynstra, F., 2020. Purchasing and supply management’s identity: Crisis? What crisis?. Journal of Purchasing and Supply Management, 26(1), p.100583.

Knight, L., Tate, W., Carnovale, S., Di Mauro, C., Bals, L., Caniato, F., Gualandris, J., Johnsen, T., Matopoulos, A., Meehan, J., Miemczyk, J., Patrucco ,A.S., Schoenherrm, T., Selviaridisn, K., Touboulic, A, and Wagner, S.M., 2022. Future business and the role of purchasing and supply management: Opportunities for ‘business-not-as-usual’PSM research. Journal of Purchasing and Supply Management, 28(1), p.100753.

Week 1 Discussion Forum

Briefly outline a project in your organisation (or one you are familiar with) covering the industry the organisation operates in, organisation’s competitive priorities (e.g. what it competes on – low price, high quality, differentiation etc), country/region, and project aim. Identify key goods and services that may be procured for this project. Comment on your own, and at least one other posted project, on the key considerations to ensure the procurement on this project achieves its strategic aims. Provide justifications for your suggestions. 

Week 2: Strategic Sourcing

This week we will look at how organizations decide which suppliers to procure from, and what different factors might affect their sourcing strategies. 

In this Week we shall

• Look at the sourcing process, and consider the complexities in strategic sourcing
• Consider what makes a good supplier 
• Examine the Kraljic’s Sourcing Matrix 
• Critique the potential and risks of partnership sourcing 

On completion of this Week, you will be able to

• Explain the importance of strategic sourcing 
• Present a model for supply base segmentation 
• Discuss the benefits and limitations of partnership sourcing 

Leturecast

In this lecturecast, we will explain the importance of strategic sourcing, present a model for supply base segmentation and discuss the benefits and limitations of partnership sourcing.

Reading

This week’s reading takes a deep dive into a number of critical issues related to sourcing. There are a number of articles and blog pieces looking at the use of the Kraljic mattix in more depth, as well as journal articles that report results of research conducted of critical issues including; how different sourcing relationship approaches affect the issues that buyers and sellers seek to have influence over; the challenges of sourcing from start-up firms; and how supplier relationships may (or may not) be rebuild following relationship failure.

Week 2 Reading

Dixit, V., 2020. Risk assessment of different sourcing contract scenarios in project procurement. International Journal of Construction Management, pp.1-13.

Kraljic P., (1983), “Purchasing must become supply management”, Harvard Business Review, Sept-Oct, p.109-117

Gomes-Casseres, B. (2011) ‘A Partnership Is Not a Purchase Order’, Harvard Business Review Digital Articles, pp. 2–4.

Montgomery, R. T., Ogden, J. A. and Boehmke, B. C. (2018) ‘A quantified Kraljic Portfolio Matrix: Using decision analysis for strategic purchasing’, Journal of Purchasing and Supply Management, 24(3), pp. 192–203. doi: 10.1016/j.pursup.2017.10.002.

Week 2 Discussion Forum

After reading the additional learning materials for this week, provide a short summary of why each of the two dimensions of the Kraljic Matrix (supply risk and profit impact) are appropriate to the development of sourcing strategies, as applied to your own organisation, and what might be missing from only using these two dimensions. Read other learners’ posts and try and find an example from a different industry than your organisation is in, and comment on the similarities and differences in why the dimensions can be used. 

Week 3: Supplier evaluation

This week we will explore how buyers can evaluate the performance of their suppliers. 

In this Week we shall

• Reflect on the role of supplier performance evaluation 
• Consider the 10C framework for developing supplier performance evaluation
• Critique the role of a weighted points plan in evaluating supplier performance 

On completion of this Week, you will be able to

• Explain the importance of supplier evaluation 
• Define the key information categories of a supplier evaluation system 

Lecturecast

In this lecturecast, we will explain the importance of supplier evaluation; and define the key information categories of a supplier evaluation system.

Reading

Two of the readings this week are practically orientated papers looking at both supplier performance assessment and managing supply risk. These papers are supported by an empirical journal article that reports the results of a study of supplier evaluation used in construction projects. Use these articles as critical points to reflect on your experience in managing supplier evaluation in projects and to develop some ideas for recommendations that your organisation could adopt. 

Week 3 Reading

Noorizadeh, A., Peltokorpi, A. and Avkiran, N. K. (2019) ‘Supplier Performance Evaluation in Construction Projects: Challenges and Possible Solution, Journal of Construction Engineering and Management, 145 (4), https://doi.org/10.1061/(ASCE)CO.1943-7862.0001616

Week 3 Discussion Forum

Identify the potential performance criteria for a strategic supplier in your own organisation or an organisation with which you are familiar and weight the categories accordingly, providing justifications. Post these on the discussion board. Post replies to other learners’ posts. To develop your critical analysis, aim to provide one of each of the following: 

• Discuss ways in which your organizations are different 
• Ask probing questions to learn more about other learners’ views
• Extend the discussion into new but relevant areas

Week 4: Procurement savings and negotiation 

This week we will investigate the challenges of measuring procurement savings and look at some important aspects of negotiation.

In this Week we shall

• Explore why procurement savings are difficult in practice to measure 
• Consider what procurement might negotiate on with suppliers 
• Delineate needs versus wants in planning for negotiation
• Explore the concept of a BATNA in negotiation 

On completion of this Week, you will be able to

• Identify the different types of procurement savings
• Critically analyse the challenge of measuring procurement savings
• Outline the processes of negotiation
• Explain the importance of a BATNA in a negotiation

Leturecast

In this lecturecast, we will Identify the different types of procurement savings, critically analyse the challenge of measuring procurement savings, outline the negotiation processes, and explain the importance of a BATNA in a negotiation.

Reading

This week’s reading are all academic articles and will help to build your knowledge and understanding of the complexities of procurement cost saving measures, negotiation tactics, and how BATNAs can be used in practice.

Week 4 Reading

Sebenius, J. K. (2017) ‘BATNAs in Negotiation: Common Errors and Three Kinds of No’, Negotiation Journal, 33(2), pp. 89–100. 

Nollet, J. et al. (2008) ‘When excessive cost savings measurement drowns the objectives’, JOURNAL OF PURCHASING AND SUPPLY MANAGEMENT, 1 January, pp. 125–135

Week 4 Discussion Forum

Identify an example of a procurement saving in a project for your organization. Explain the type of saving and how the saving might be measured. Post these on the discussion board. Post replies to other learners’ posts commenting on the potential challenges of measuring the saving. 

Week 5: Digital procurement 

This week we will look at how e-procurement originally aimed to move procurement from an operational function to a strategic function, and how digital procurement and data analytics can potentially revolutionise and transform procurement’s contribution.

In this Week we shall

• Explore the changes in Industry 4.0 and Industry 5.0 and consider how these change procurement 
• Reflect on the critical role of data and its potential for both innovation and disruption

On completion of this Week, you will be able to

• Outline the strategic and operational impacts of e-procurement
• Explain how digitalisation is changing the role of procurement 
• Assess the importance and potential of data analytics in procurement 

Lecturecast

In this lecturecast, we will outline the strategic and operational impacts of e-procurement, explain how digitalisation is changing the role of procurement and assess the importance and potential of data analytics in procurement.

Reading

This week there is a short video outlining how data analytics can be used in procurement, and a short non-academic article that takes a critical look at the role of data. This week’s academic reading contains two studies from South Africa of Procurement 4.0 and the circular economy and a paper that explores the potential of Artificial Intelligence in procurement 

Week 5 Reading

Bag, S. et al. (2020) ‘Procurement 4.0 and its implications on business process performance in a circular economy’, Resources, Conservation & Recycling, 152. doi: 10.1016/j.resconrec.2019.104502.

Vail, 2021, SURPRISE, SURPRISE: PROCUREMENT HAS YET TO SOLVE ITS DATA CHALLENGES, Future of Sourcing, 26th March 

Sievo (2019), Procurement Analytics Simply Explained – video

Week 5 Discussion Forum

After completing this week’s lecturecast and the additional learning resources, identify how procurement data analytics could be used to provide insights for your organization. You can apply this to either procured goods and services for your organization in general, or for a project you have experience with. Post replies to other learners’ posts. To develop your critical analysis, aim to provide one of each of the following: 

• Identify an example similar to your own 
• Ask probing questions to learn more about other learners’ views 
• Answer questions posed

Week 6: Sustainable procurement

This week we develop your critical analysis skills by exploring the rise of sustainability issues and delving into how these might change the roles and responsibilities of procurement. 

In this Week we shall

• Explore a range of sustainability concepts including the Triple Bottom Line, the United Nation’s Sustainable Development Goals, the circular economy, and ESG 
• Reflect on how sustainability might impact the choices made in our own organizations
• Critically analyse how sustainable procurement might impact projects in our own organizations 

On completion of this Week, you will be able to

• Explain the term Triple Bottom Line 
• Apply the principles of the Triple Bottom Line to a purchasing context 
• Assess the impacts of sustainable procurement on project management 

Lecturecast

In this lecturecast, we will explain the term Triple Bottom Line, apply the principles of the Triple Bottom Line to a purchasing context, assess the impacts of sustainable procurement on project management and Sustainable Development.

Reading

This week’s reading includes videos that explain the circular economy and a short practitioner focused piece on sustainable value chains. There are also two interesting Harvard Business Reviews articles. The first, by Winston examines why ESG has recently become mainstream in business. The second is by John Elkington, who famously developed the concept of the Triple Bottom Line. In this article, he takes a very critical look at the Triple Bottom Line and how businesses around the world have incorrectly adopted it as a trade-off model and why this is so problematic for sustainable development. 

Week 6 Reading

Required Reading

Winston, A. (2021) ‘Sustainable Business Went Mainstream in 2021’, Harvard Business Review Digital Articles, pp. 1–9.

Elkington, J. (2018) ‘25 Years Ago I Coined the Phrase “Triple Bottom Line.” Here’s Why It’s Time to Rethink It’, Harvard Business Review Digital Articles, pp. 2–5

McKinsey (2021), Buying into a more sustainable value chain

Ellen MacArthur Foundation, (2011), Explaining the Circular Economy and How Society Can Re-think Progress

C2C World/EPEA (2014), Introduction to Cradle to Cradle

Week 6 Formative Activity

Read the Elkington (2018) Harvard Business Review article.

• Consider and summarise the differing priorities within the Triple Bottom Line for your organisation (or project)
• Comment on whether any of the dimensions dominate the decision making and suggest explanations why
• In light of the Elkington article, has your organisation/project incorrectly considered the dimensions as ‘trade-offs’? Give explanations 
• Suggest ways in which the Triple Bottom Line might be reconsidered in your organisation/project, and the implications 

Week 7: Contract law and contract management

Welcome to Week 7. This week we will look at the importance of contract management and provide a high-level overview of the legal requirements for a valid contract. 

In this Week we shall

• Look at the importance of contracts and contract management in project management
• Cover the basic legal requirements for a valid contract 
• Define the terminologies of KPIs and SLAs in relation to contract management 

On completion of this Week, you will be able to

• Describe the requirements for a valid contract 
• Explain the importance of contracts for procurement and project management 

Lecturecast

In this lecturecast we will describe the requirements for a valid contract and explain the importance of contracts for procurement and project management.

Reading

This week there is longer (25 minute) podcast to support your learning on contract management. The podcast is produced by the Chartered Institute of Procurement and Supply and is an interview with their Group Director on contract management. There is also an academic article that covers experiences of buyers and sellers of strategic relationships management processes that also explores the conditions that create risks of relationship failure. 

Week 7 Reading

Required Reading

Pinnington, B. D., Meehan, J. and Scanlon, T. (2016) ‘A grounded theory of value dissonance in strategic relationships’, Journal of Purchasing and Supply Management, 22(4), pp. 278–288. doi: 10.1016/j.pursup.2016.04.005.

Week 7 Discussion Forum

Provide 3-5 arguments as to why it is important for project managers to understand legal issues in contracts. Comment on the potential consequences of not understanding legal issues and ensure you justify your points. Post replies to other learners’ posts, commenting on the potential difficulties that can arise in managing legal issues in contracts, either by project manager, buyers, sellers or lawyers.

Week 8: Public procurement and extending responsibilities

This week we will take a closer look at public sector procurement and also look at how various legislation around the world is extending procurement’s social responsibilities.

In this Week we shall

• Consider what value might mean in for public procurement and why controls are important 
• Explore the concept of social value 
• Explore the implications of new modern slavery implications for procurement 

On completion of this Week, you will be able to

• Outline the role and scale of public procurement
• Explain the concept of value for public procurement contexts
• Explain the need for procurement controls in public spending
• Identify areas of extended responsibility for procurement 

Lecturecast

In this lecturecast we will outline the role and scale of public procurement; Explain the concept of value for public procurement contexts; Explain the need for procurement controls in public spending; and Identify areas of extended responsibility for procurement.

Reading

All the reading this week is from academic journals and can be used to deepen your critical understanding of the dynamic area of social value and modern slavery and how these issues are impacting procurement. Articles report how businesses are responding to new responsibilities for social issues and they help explain the role of procurement in addressing these complex problems. 

Week 8 Reading

Required Reading

Malacina, I. et al. (2022) ‘Capturing the value creation in public procurement: A practice-based view’, Journal of Purchasing and Supply Management, 28(2). doi: 10.1016/j.pursup.2021.100745.

Grandia, J.. and Meehan. J., (2017) ‘Public procurement as a policy tool: using procurement to reach desired outcomes in society’, International Journal of Public Sector Management, 30(4), pp. 302–309. doi: 10.1108/IJPSM-03-2017-0066.

Allen, B. (2021) ‘Broader outcomes in procurement policy – a case of New Zealand pragmatism’, Journal of public procurement, 21(3), pp. 318–341. 

Pinnington, B., Benstead, A. and Meehan, J. (2022) ‘Transparency in Supply Chains (TISC): Assessing and Improving the Quality of Modern Slavery Statements’, Journal of Business Ethics, pp. 1–18. doi: 10.1007/s10551-022-05037-w.

Meehan, J. and Pinnington, B. D. (2021) ‘Modern slavery in supply chains: insights through strategic ambiguity’, International journal of operations & production management, 41(2), pp. 77–101

CRANE, A. (2013) ‘Modern Slavery as a Management Practice: Exploring the Conditions and Capabilities for Human Exploitation’, The Academy of Management Review, 38(1), pp. 49–69. doi: 10.5465/amr.2011.0145.

Week 8 Discussion Forum

Consider to what extent your organisation or industry is experiencing pressures to account for a widened set of socially related responsibilities in its supply chains.  Provide 3-5 examples of areas of change (either direct or indirect) and where the pressures stem from.   Comment on other learners’ posts, particularly those that are in similar industries.