Strategic Sourcing PDF

Strategic Sourcing: A Paradigm Shift in Supply
Chain Management
Student Name: Michael Miszczak
Course: APRJ-699
Assignment Title: Applied Project - Final Proposal
Word Count: 15, 305
Submission Date: August 31, 2014
Applied Project Coordinator: Teresa Rose. PhD
AP Supervisor: Paul Larson. PhD

ABSTRACT
Strategic Sourcing: A Paradigm shift in Supply Chain Management can be the bane of
an evolving organization and a key success factor in an ever changing dynamic
procurement model. The keys to success revolve around three elements; People,
Process and Technology but in order to accommodate these goals there must be a
strategy put in place and a vision as to where an organization is going with regards to
Procurement. Procurement still has not been elevated to an equal on the Senior
Management Team although it has made great strides in many organizations. This
small select group of companies whether public or private have reaped the benefits of
change and as a windfall have improved their bottom line while elevating the stature of
Procurement. It is ultimately very important for all organizations to understand Strategic
Sourcing as well as Category Management, the difficulties that can eschew in regards
to implementation, planning, resources and their skillset, benefits and the complexity
around a long term strategy. But as an organization who embarks on this journey the
rewards can be truly astounding and quantifiable in terms of your return on investment.
This research paper reviews Strategic Sourcing and Category Management and looks
at the many management principles used that highlight the need for a broadened
procurement skillset with the change to either model. We look at Porter’s Value Chain,
Porter’s Five Forces Model, SWOT Analysis, the Kraljic Segmentation Matrix, and a
Cost-Benefit Analysis. We also speak to how change management can be very difficult
when we use a Theory E which focuses on economic value as a strategy. And then
move to a more accommodating and evolving Theory O strategy focusing on
organizational capabilities where a high value is put on the employee. A contradiction in
terms when the marketplace is looking for rapid change and a cut throat corporate
behaviour does the job. The paper equivocates the need for a broadened skillset.
Our literature review looked at the plethora of information written and available on the
internet to substantiate our key research questions around why an organization should
switch to this model, is the skillset there or does it need upgrading and is it sustainable
for the future. We provided data on the specialized procurement job market with regards
to Strategic Sourcing, looked at the keyword emphasis that employers were making in
their job descriptions and then focused on a competency framework as a result.
Our research paper also pointed to the lack of maturity in the market and it was clear
that any change to Strategic Sourcing was a work in progress and that many companies
still did not see the benefit of this change.
This model as espoused is a goal that is obtainable although it is not something that can
be done quickly and requires a window of opportunity over a 3-5 year timeline, although
dependant on the complexity of an organization.
This research paper was written to help executives at all levels understand Strategic
Sourcing and as well Category Management, their complexities and their intricacies. It is
the hope of the writer that he alleviates some concerns while providing enlightenment
around this field of expertise. And that we are able to quantify the benefits and return on
investment should an organization make a change to this model through a strategic shift
and procurement plan. This is a win-win for any organization.
Strategic Sourcing: A Paradigm Shift in Supply Chain Management
TABLE OF CONTENTS
1. INTRODUCTION.........................................................................................................................6
2. THE RESEARCH QUESTION....................................................................................................7
DEFINITION OF KEY TERMS USED ............................................................................................. 7
THE DELIMITATIONS AND LIMITATIONS ................................................................................... 9
3. LITERATURE REVIEW ..............................................................................................................9
BACKGROUND TRADITIONAL PURCHASING......................................................................... 10
WHAT IS STRATEGIC SOURCING? ...........................................................................................11
SWOT ANALYSIS....................................................................................................................13
MICHAEL PORTER’S 5 FORCES MODEL......................................................................... 14
SEGMENTATION ANALYSIS (KRALJIC MATRIX) ...........................................................15
WHY MOVE AN ORGANIZATION TO A STRATEGIC SOURCING MODEL? ......................16
CATEGORY MANAGEMENT AS A SOURCING STRATEGY .................................................23
SKILLSET TO SUPPORT A STRATEGIC SOURCING MODEL? ........................................... 26
4. RESEARCH DESIGN AND COLLECTION .............................................................................28
INDUSTRY RESEARCH .................................................................................................................28
HYPOTHESES.........................................................................................................................31
METHODOLOGY .............................................................................................................................32
5. STATEMENT OF RESULTS ....................................................................................................35
6. ANALYSIS ................................................................................................................................35
THE COMPETENCY FRAMEWORK............................................................................................36
7. RECOMMENDATIONS ............................................................................................................44
MOVING TO A STRATEGIC SOURCING MODEL .................................................................... 44
PROCUREMENT SKILLSET AND THE SS MODEL ................................................................. 51
Final Proposal – Michael Miszczak

8. CONCLUSIONS........................................................................................................................53
KEY FINDINGS ................................................................................................................................54
STRATEGIC COMPLEXITY ........................................................................................................... 54
PEOPLE AND WORKFORCE........................................................................................................ 54
THE FUTURE ................................................................................................................................... 55
REFERENCES ..............................................................................................................................56
APPENDIX A: STRATEGIC SOURCING JOB DESCRIPTION KEYWORDS...........................61
APPENDIX B: CATEGORY MANAGEMENT JOB DESCRIPTION KEYWORDS ....................63
APPENDIX C: DATA ON JOB DESCRIPTIONS ........................................................................65
Final Proposal – Michael Miszczak

1. INTRODUCTION
There has been a transformation in the purchasing and procurement functions certainly
over the last decade. From a passive, administrative, and reactive process to a
proactive, strategic, boundary spanning function (Rendon, 2005) enveloped under
buzzword Strategic Sourcing (SS).
This movement was predicted back as far as the 1960’s, leading with retail in the
1990’s, and with the transformation continuing to this day which has led to numerous
benefits for leading-edge organizations. The approach has encapsulated the other
supply chain functions, including but not limited to materials management, logistics and
physical distribution. By doing so under supply chain management the goal was to
adopt a more total supply chain management focus including the integration of the
organization’s strategic business plan.
SS has evolved to encompass a myriad of business types from various sectors such as
Oil & Gas, Retail, Banking, Municipal and Federal Government and Healthcare
worldwide where a broad base of commodities, supplies and services are purchased on
a regular basis. The writer formally experienced a strategic multi-year SS
implementation when previously employed in the Healthcare sector. It is clear that such
an implementation is meant to take traditional purchasing/procurement in small to large
organizations to an entirely new level encompassing bold strategic initiatives that align
with a corporation’s vision and mission.
As Michael Porter has stated “Change brings opportunities. On the other hand, change
can be confusing.” (Porter, 2001)
If you asked 10 different people what SS is, you will get 10 different answers (Newhart,
2006) but resoundingly you will find that there are common themes throughout.
Adopting a SS model requires a strategic shift, a cultural shift and a realigning of staff
resources to fit the model in question, meaning substantial change. It is a model that
moves an organization in steps over multiple years to a sustainable sourcing model,
from what we have already termed, a traditional purchasing model. In other words; we
have moved from an organization that is primarily fixated on cost reductions and quick
procurement wins to an organization that is evolving to encompass Total Cost of
Ownership (TCO), building supplier relationships and category spend reduction in order
to create and sustain a competitive advantage. (Anderson & Katz, 1998)
According to Joanie F. Newhart (2006) SS is an overall strategy to obtain the following:
• Better value by obtaining cheaper pricing,

• More favourable warranties,
• Better terms and conditions, and/or
• A realization of socio-economic goals.
The rate of change of the procurement function continues to accelerate primarily to
keep pace with business demands (Supplier Category Management, 2012) and as well
in order to accommodate the strength this function is seeing in its role throughout major
Applied Project – Michael Miszczak 6|Page
organizations in Canada and the world. As the American Productivity & Quality Center
(APQC) and KPMG study on Supplier Category Management shows, there is a
profound change occurring in procurement that will outgrow the initial cost savings and
process improvement. It will grow through understanding business strategy, how key
supply markets work and its ability to affect business growth. This paper will show that
the procurement function is maturing into a sustainable value driver for business.
2. THE RESEARCH QUESTION

The researcher’s objective as part of this applied project is to answer the following
strategic management questions:
1. What does an old school purchasing organization need to understand in
order to put in place an effective SS strategy and why move to an SS
model?
2. Does the introduction of an SS model require resources to have a more
refined skillset than what may presently exist
3. Is the lack of skillset within a resource base a threat to log-term
sustainability?
This paper will address the key issues and processes that need to be addressed to
make a successful transition to a strategic sourcing model while increasing the body
knowledge in a burgeoning field.
DEFINITION OF KEY TERMS USED
Cost/Benefit Analysis (CBA) – A measurement tool used to determine the financial
ramifications of undertaking new projects, implementing new processes, and making
purchases and/or staffing decisions (O’Grady, 2013). CBA forces the individual to look
explicitly and systematically at the various factors which influence strategic choice.
(Plowman, 2013)
Demand Analysis – Ensures that the organization is focused on its critical demands,
focusing on not only cost but quantity. An analysis that defines a good and service,
provides a spend analysis, a cost breakdown, looks at the current supply arrangement
issues, specification of requirements and highlights the gaps with a plan to address
(Queensland, 2010).
Reactive Purchasing – This is a procurement approach where no proactive sourcing

strategies have been put in place and therefore the purchasing and supply management
role has an entirely reactive role. Where an organization still operates on the basis of
unexpected demand responding to individual needs as and when they arise (CIPS,
2014).
Sourcing - Sourcing is the proactive management of a supply market to ensure access

to adequate resources required for the long term needs of the firm: understand market
characteristics, identify relevant potential suppliers, define a strategy for the firm, and
set the objectives for any market shaping effort. Sourcing frames the agreement with
the suppliers involved in the strategy, without necessarily going into the details of the
contract (Philippart, 2001).
Spend Analysis – The analysis of past, current & projected spending patterns. Provides
organizations the information and decision-support required to develop supply
strategies around direct and indirect spend that are aligned with the objectives of the
organization and to identify and prioritize sourcing & procurement improvement
initiatives.
Strategic Sourcing (SS) - Defined as an institutional sourcing and supplier management

process that continuously improves and re-evaluates the supply chain activities of the
company. It is an iterative process that cuts cost and reduces risk, while building better
relationships with fewer more critical suppliers (GE Capital, 2012).
Sustainability in Procurement - Refers to using procurement to deliver long term social,

economic and environmental benefits with an emphasis from short term savings to long
term value through the life of the product or service. (Department for Environment, Food
and Rural Affairs, June 2006)
Tactical Purchasing – A subset activity of SS focusing on operational purchasing

requirements based on information from a limited environmental scan (Lysons and
Farrington, 2006).
TagCrowd - a web application for visualizing word frequencies in any text by creating
what is popularly known as a word cloud, text cloud or tag cloud. (Steinbock, 2006) For
the purposes of our research project we will be generating a word cloud by pasting in
text from job descriptions into this website in order to visualize frequency of words.
Total Cost of Ownership (TCO) – An estimate of the total costs of goods, services or
construction over the whole of their life. It is
a combination of the purchase price plus all
other costs you will incur (direct or indirect)
less any income you will receive
(Government Procurement Branch, New
Zealand, 2013).

Traditional Purchasing – Involved requisition, soliciting bids, purchase order, shipping

advice, invoice and payment, a process that was transactional in nature, or clerical in
function. Getting the right quantity and quality of goods to the right place at the right
time at a decent cost (Reference for Business, 2014).
Triple Bottom Line (TBL) - A sustainable business concept coined by John Elkington in
1997. Organizations that want to become socially and environmentally responsible need
to measure and report on not one but three “bottom lines”. The first measurement,
traditional profit and loss, shows the performance of the business in terms of “profit”.
The second “people”, measures the social performance of the organization and the third
bottom line, “Planet”, measures the environmental performance of the organization.
Value Chain Analysis – A generic framework that analyzes the behavior of costs as well
as existing and potential sources of differentiation. It is a quantitative analysis of the
activities to produce, market, deliver and support products and the relationship between
these activities (Porter, 1985). Procurement potentially being a key activity.
THE DELIMITATIONS AND LIMITATIONS

This research will be delimitated to the Canadian procurement market although there is
no doubt that this field is influenced globally and that the changes occurring are not
limited nor rely on Canada as a source of origin in terms of changes taking place.
Procurement and specifically as it encompasses SS and it’s sub-category of CM will be
limited in scope also as it will not encompass all areas of procurement as they are
defined but will be limited to showing a trend exhibiting direction for the longer term with
SS and CM. Although our literature review will focus on Canadian literature we will not
limit our focus and emphasis to only this, and will review literature whose origin is global
in order to capture world-class viewpoints.
The data collection and analysis thereof will also be limited to a specific period of time
generally several months of collection prior to completion of this paper and therefore
may exhibit short-comings due to the lack of a longer term source of data collection.
Being a qualitative analysis for the most part and relying on data predominantly
collected through the internet the paper will be limited in scope and focus on the general
trends occurring in this field of expertise.
3. LITERATURE REVIEW
SS has become a model that is being espoused by many organizations throughout the
world and for good reason. Therefore there is a great deal of literature on the topic of
SS and how to implement a plan that drives a successful implementation. But there is
very little literature that speaks to whether a present organization embarking on a SS
implementation has the employee skillset to sustain an implementation, process or plan.
A comprehensive literature review will provide results and focus attention on putting in

place a strategic sourcing and competency framework that validates a procurement

sustainability model for the future.
BACKGROUND TRADITIONAL PURCHASING
As illustrated by Figure 1, traditional purchasing aside from being administrative in
nature was also very transactional with focus on what is shown in the diagram.
Figure 1 – Strategic Sourcing is Evolving

Figure 1, Strategy Sourcing is Evolving. Adapted from “Strategic Sourcing” by Mubarak, (2009).
Slideshare, Page 11. Retrieved on March 16, 2014 from
http://www.slideshare.net/mubarak2009/Mubarakadmaproposal-Rev01MA-823838
From Transactional purchasing or what might also be called Reactive purchasing and
then onto Tactical purchasing, organizations have evolved into SS. Organizations
having understood the value procurement can bring to the table have asked budget
holders who traditionally did their own buys, to engage procurement in the buying
decision (Payne, 2012). So what has significantly changed? As mentioned earlier,
procurement has become strategic in outlook. It not only looks at the lowest product
cost but has shifted focus to TCO in order to determine the true cost of a good or
service. And we must not forget that it uses technology to enhance the delivery
methodology and to get the message across, that there is clear and present danger to
ignoring the strategic implications of a solid strategic plan.
Applied Project – Michael Miszczak 10 | P a g e

WHAT IS STRATEGIC SOURCING?

SS is a well-established and proven methodology for managing large-scale, medium to
long term procurement activities. (State Government Victoria, 2012) It consists of two
key capabilities:
Strategic contracting focuses on developing a detailed knowledge base of the
market and the category being sourced, and using this knowledge to develop
optimal sourcing solutions.
As well (Engel, 2004) states that SS is an organized and collaborative approach to

leveraging targeted spend across locations with select suppliers that are best suited
to create knowledge and value in the customer-supply interface.
Category Management (CM) focuses on managing contracts to ensure that the

negotiated contract benefits are realised, and driving continuous improvement in
contract benefits year on year.
It is as well data intensive and analytical in character and speaks to understanding

data. It was once a “Retailer-Supplier Process of managing categories as strategic
business units, producing enhanced business results by focusing on delivering
consumer value” (ECR, 1997). It has gone beyond the retail industry as previously
suggested and the consumer is synonymous with customer, stakeholder or end-
user.
In the article “The Power of Procurement”, KPMG (2012) adds that Supplier
Relationship Management is a key core competency and a strategic driver as part of the
ongoing procurement activities of any organization, updating the key capabilities
potentially to three if not already covered under the guise of category management.
SS is a process driven by an identified goal or need and consists of:
1. Evaluating current and potential sourcing opportunities,
2. Assessing their value and relevance to long-term goals and overall business and
supply chain objectives, and
3. Formulating and applying action plans and processes for critical commodities or
supply networks.
Figure 2 focuses on an example of 7-step SS process (Stegner, 2011), one of many
multi stepped processes used dependent on commodity and industry. Therefore
diversity of models may exist, but each with a commonality of purpose. You may find
that words change and the number of steps may change to accommodate the varying
types of acquisitions that may occur. However, there is no doubt that understanding
your product and managing your supplier relationship are key ingredients to a
successful strategy.

Figure 2 – 7-Step Strategic Sourcing Process

Stegner. (2011). The Value of Supply Strategy. Page 7. Retrieved on April13, 2014 from
http://supplychain.broad.msu.edu/files/2011/09/stegner.pdf
It is at this point that we begin to understand just how complex a SS process may be
and, the skillset expected of the procurement professional today. An indepth knowledge
is required throughout the process, a skillset that is garnered through real world
experience, advanced education and a passion to build on a changing procurement
dynamic. Our 7-step process reveals that it is essential as part of an SS strategy that
we put in place a thorough well thought out procurement plan that emulates and
captures the sourcing process.
Step 1
Understanding our internal and external markets, look at where we stand in the value
chain, our suppliers and the market place and just how important a particular good and
service is to the organization. We can do this through a SWOT analysis and an anaysis
using Michael Porter’s 5 forces model. We should as well conduct a spend analysis
understanding our curent and past patterns around the goods and services bought
internally. This can be a very time consuming process but is critical to determining the
best sourcing strategy. It may make sense here to group an entire product spend that
has similarities into one succinct category in order to determine total spend. A
segmentaion analysis is another analysis that can be critical, positioning the product in
relation to others purchased by an organization (Clegg, Montgomery, 2005).
Understand the needs of your users, stakeholders and/or customer with the view to
understanding supplier performance. What is driving industry competition and what is
the state of the current supplier or the potential suppliers in the marketplace. Use the
tools below to understand our internal and external environment.
SWOT ANALYSIS
Is a strategic planning tool that helps a business focus on the key issues. This analysis
tool in regards to procurement can be used from a multi-faceted perspective. At a very
high level it can be used to understand the supply chain or procurement capabilities of
an organization. But in terms of SS, simply put a SWOT analysis for goods and services
would typically look at the internal strengths and weakness generated from a demand
analysis. Opportunities and threats look at external factors such as a supply market
analysis. An example might be whether a supplier perceives the procuring organization
as a valued customer (Queensland, 2010). An illustrative example is shown in Figure 3
following shows a SWOT analysis of a business critical software requirement and
portrays it’s use effectively as a business tool.
Figure 3 – SWOT analysis of business-critical software requirement – Ilustrative only

The State of Queensland. (June 2010). Procurement Guidance: Planning for significant procurement.
Department of Housing and Public Works. Page 16 of 51. Retrieved on August 3, 2014 from
http://www.hpw.qld.gov.au/SiteCollectionDocuments/ProcurementGuideSignificantProcurement.pdf

A SWOT analysis can help us to identify a procurement strategy that will achieve the
procurement objectives and allow us to provide a meaningful summary on the merits
and suitability of this option identified through some solid research and analysis of the
good or service. A valuable tool regardless of where it may be used.
MICHAEL PORTER’S 5 FORCES MODEL
This tool is ideal In terms of developing a procurement strategy (Murray, 2012). So as a
buying organization we are in the middle as illustrated in the Figure 4 analysis of the
information products industry. Michael Porter’s model allows us to describe the forces
that are driving industry competition. It will not only improve our analysis of the industry
but will inform other members of the team as to information regarding the market place.
Figure 4 – Porter’s five forces analysis of the information products industry
Clegg, H & Montgomery, S. (2005). 7 Steps fpr Sourcing Information Products. Sourcing Information
Outlook, December 2005, vol. 9 no. 12. Page 36. Retrieved on July 1, 2014 from
http://www.atkearneypas.com/knowledge/articles/2005/7steps.pdf
As a buying organization procurement contributes as part of the value chain supplying

external customers and clients as described by Michael Porter in his value chain
analysis of activities. The bargaining power of suppliers relates to our current pool of
suppliers available to the organization, whereas the threat of new entrants gives us the
potential new entrants that our customers and clients could potentially draw on. It is
interesting to note that the new entrants could also disrupt the buying power of our
current supplier base allowing us the opportunity to source elsewhere. So as part of SS

we might want to reduce the barriers that prevent new entrants in order to provide more
choice, healthy competiton and spark innovation through new technology introduction,
or a disruptive technology, i.e. a technology that displaces an established technology
and shakes up the industry. Or a ground breaking technology that sparks the creation of
an entirely new industry.
The threat of substitutes as well can provide us with alternatives to our existing
specifications around a product, or for that matter a service. But exercising this
viewpoint can be risky for an organization even though the cost-reward benefit might be
huge in the end. It is something that must be weighted and discussed, but may not be in
the cards due to the risk aversion of an organization and their customer base.
SEGMENTATION ANALYSIS (KRALJIC MATRIX)
This positions the product in relation to others purchased by your organization and
determines potential risk in terms of your product scope. Described in detail later in this
paper.
Step 2
How does the product you are sourcing align with your overall business strategy. Here
is where a category positioning matrix becomes useful, one similar to what we have
illustrated in Figure 6, developed by Kraljic. Where the product is positioned will help
you define the strategy to use.
Step 3
Here we look to identifying the supplier base and all potentially viable suppliers. Look to
criteria in selecting viable suppliers. You might do this through a Request for Information
(RFI), whereby you collect written information about the capabilties of various suppliers
that may lead to a shortlist of candidates who could participate in a Request for
Proposal (RFP).
Step 4
The purpose is to identify an excution strategy as part of Step 4 potentially using a RFP.
A thorough evaluation proposal based on submissions from suppliers that prioritize
weightings for specifics around specifications, usage, pricing and more leading to
negotiations and award.
Step 5
Here we negotiate and select suppliers. So it is important to develop a negotiating
strategy and to put in place an effective team with varying expertise in order to meet the
demands of a successful negotiation session. Clear understanding of what is
acceptable, not acceptable and where you want to land is critical to your success and
negotiating position. What are you willing to concede and what will you get in return.
Negotiation can be a very formalized process that requires understanding of both
parties objectives. And lastly what is your contingency plan if you are unsuccessful in
your negotiations.
Step 6
If you have decided to work with a new supplier and/or to discontinue an old one, you
will need to (Clegg & Montgomery, 2005):
• Identify any transition issues (providing user details to the new supplier, for example),
• Consider the organizational implications and any required changes,
• Create new processes and procedures if necessary,
• Create a transition/implementation plan, and
• Communicate the changes to your users.
Step 7
Now that an agreement is in place it is important to continue evaluating the relationship
over its term by putting in place some contractual performance metrics and regular
meetings. As well now you also have time to develop some loose plans as to how you
will move forward the next time around by planning ahead.
WHY MOVE AN ORGANIZATION TO A STRATEGIC SOURCING MODEL?
A SS model brings Supply Management to the forefront of an organization. And the
subsequent strategic supplier management spurs innovation, identifies new product
opportunities, brings access to new markets or technology and provides intelligence for
strategic decision making (Slaight, 1999).
Some of the most common synonymous terms heard for buying today include (Duffie,
2005):
• Sourcing
• Strategic Sourcing
• Category Management
• e-Sourcing
• Purchasing
• Procurement
• e-Procurement
• Supplier management
• Supplier Relationship Management
• Supply Base Management
SS puts in place as we have discussed a sourcing strategy that aligns an organization’s
overall business strategy with the sourcing objectives, a theme we will espouse over
and over in this paper.
‘STRATEGIC SOURCING - A Recipe for Strategic Excellence’ (Ball, 2005) suggested

that the acquiring of goods and services for much of the 20 th century was considered as
somewhat of a nuisance. But as of the writing of his article the competitive landscape
had changed from a relatively stable to a dynamic and intensely competitive

environment. Obviously there are key benefits to a sound SS strategy and senior
executives are now seeing that the decision making processes through the purchasing
department can have a profound impact on the financial viability of an organization. One
thing that is clear is that SS is not transactional buying. It is a systematic process that
directs purchasing and supply managers to plan, manage and develop the supply base
in line with the organization’s strategic objectives. Organizations want to maximize the
dollars spent by looking at spend, doing a spending analysis and determining the
products that the organization buys at the highest volumes. But it is not only this as they
must understand the marketplace for the products, understand the economics and
usage of the supplier of the product, develop a procurement strategy and develop
integrated supplier relationships that go beyond the types of relationships we had in the
past (Reference for Business, 2012).
In the Strategic Procurement Plan for 2013 - 2018 put forward by the New South Wales
(NSW) government they state that their strategy is to become more customer-centric by
involving their customers in process, deliver products that are fit for purpose, provide
information on new contracts, products, processes and policies that may affect their
customer and lastly to work with customers to deliver best value solutions in a timely
manner (Strategic Procurement Plan, p. 3). Our customers are the end-users,
stakeholders, charter members and for that matter anyone in the organization that is
touched by a strategic procurement plan. These “customers” become involved through
process as we develop a strategic plan, some being core and others being on the
periphery but all essential to the successful implementation of a plan. So an
organization moves in this direction to drive value for money, deliver better quality and
to align with business needs. Resoundingly similar points were stated by many authors
as part of our literature review. Although an organization may focus on the customer
they cannot forget the partnership that they also foster with their suppliers, which is also
integral to success lest we forget the impact of any social responsibility that must also
be extolled in any contract. The Swedish Public Procurement Act, 2012, states the
following regarding social responsibility in the context of performance of a contract: “A
procurement authority may set specific social, environmental and other conditions for
how a contract is to be performed.”
The delivery of such a strategic framework also requires that an organization attract and
retain capable people to deliver these procurement services by defining workforce
requirements, training and continuity plans.
In order to gain a clearer understanding some fundamental questions need to be asked.
• Who are the suppliers? Do we understand them?
• What is the customer buying?
• Who are they buying from?
• What are the risks?
• How much is spent with each supplier?
• What process do we use to acquire the goods?
• What is the quality of the goods purchased?
• Does the delivery meet the timelines of the organization?
Once we have asked these questions, how can we take the information and move us
forward? We may do this by understanding that SS is a value driver for the business
providing many benefits and/or advantages to an organization that may be strategically
utilized in part or whole, immediately or over time. These advantages speak to the
following:
1. Best Practise Sharing,
2. Cost Savings,
3. Increased Quality
4. Enhanced product specifications,
5. Standardized Pricing,
6. Improved Operation Efficiency,
7. Access to New Suppliers, and
8. The Creation of Partnerships with Suppliers.
A business may move in the direction of SS in order to reduce cost while maintaining
and/or improving quality/service, leverage the entire organization’s spend, look to
improvement opportunities by understanding category buying as well as standardizing
contract terms and conditions. Obviously the benefits can be quite staggering whereas
we have just identified a few important drivers but the eight (8) points listed above may
be considered essential drivers for any organization.
An organization looking to create a sourcing advantage may look beyond to a
segmentation analysis to decide which relationships are transactional, collaborative or
strategic in order to decide which services to drop or nurture. A segmentation analysis
prioritizes strategic sourcing activities based on suppliers/category criticality, a matrix
model originally espoused by Peter Kraljic in 1983, still valid today and illustrated in Fig.
5 & 6. Mr. Kraljic espoused that a company needed to exploit its purchasing power with
important suppliers and reduce its risks of disruption to a minimum, done through an
analysis. Understanding the products and services as well as your suppliers helps to
minimize supply risks while taking advantage of your buying power.

Figure 5 – Stages of Purchasing Sophistication

Kraljic, Peter. (1983). Purchasing Must Become Supply Management. Harvard Business review. Page
111, Retrieved May 8, 2014 from https://www.nevi.nl/sites/default/files/kennisdocument/LEV-PORT-art-
013-bl.pdf

Figure 6 - The Kraljic Portfolio Purchasing Model

Osoro, Bonson. (2013). Using the Kraljic portfolio purchasing model. Supply Management. Retrieved April
23, 2014 from http://sm.redactive.co.uk/resources/how-to/guide-to-supplier-appraisal/using-the-kraljic-
portfolio-purchasing-model/
Duffie (2005) writes about UPS Supply Chain solutions. As mentioned previously SS
aligns the organization’s overall business strategy with the sourcing objectives. As part
of this writer’s role at Vancouver Coastal Health in 2006, a supplier positioning table
was defined based on category strategies. The below figure is an example of how an
organization may value their supplier relationships based on the risk and buyer impact
on supply market. The Kraljic positioning matrix is an excellent tool that allows an
organization to focus its resources where there is the most value to be gained. Figure 7
illustrates the use of a supplier segmentation analysis perform by Vancouver Coastal
Health in 2006.

Figure 7 - Supplier Positioning

Miszczak, Michael. (December, 2006). Supply Chain – Roadmap to Excellent Operational Support &
Sustainability. Vancouver Coastal Health. Powerpoint presentation. Slide 15. Retrieved on August 14,
2014.
The upper right quadrant (4) points to a high degree of business risk and high
expenditure, and therefore there must be a close supplier relationship as the products
offered by these suppliers are critical in nature. The upper left quadrant (3) indicates a
high degree of business risk but a low expenditure but still tells us that we need to
ensure supplies given the specialization of the products offered and their threat and risk
to the organization. The bottom right quadrant (2) tells us that we have a low degree of
business risk but a high expenditure that drive profits. There is volume here and
therefore this equates to some level of power in favour of the organization. The bottom
left quadrant (1) indicates suppliers that exhibit a low level of business risk as well as
low expenditures, suppliers where products purchased may be routine in nature or a
commodity. Typically quadrants 2, 3 and 4 are usually significant purchases that
represent the majority of an organization’s spend, are complex in their demand and/or
supply characteristics and have a significant impact on an organization’s operations.
Just imagine if all of a sudden hospitals could not get some of their critical drugs to treat
patients or if an unplanned shutdown were to trigger a shortage of medical isotopes
where no other supplier was available to cover the shortage. This would be a disaster to
patient care and life threatening. With a detailed analysis, a supplier positioning may tell
us a great deal (Queensland, 2010)!
A properly defined sourcing strategy assists any organization, by gaining a true

understanding of its requirements, knowing how it must map to the existing supply
market, and then develop a plan for both short and long-term sourcing objectives. But
there must be an understanding this strategy can be so much more. SS can define what
an organization’s competencies are or what they should be. It can identify
redundancies, aggregate similar products and consolidate where needed. In fact it can
identify non value-added functions that waste time, resources and require financial input
leading to a potential outsource of these functions. In order to realize these benefits
business is realizing that procurement is a key part of business, considering the huge
spend on goods and services. And that the results of a well-managed SS plan can be
impressive and can extend well beyond cost reduction. That at least is the hope and the
vison, but to date may not be the reality we see.
Uncovering lifetime costs of certain kinds of assets can be done by focusing on the total
costs rather than just the purchase price. There needs to be a focus on TCO and the
complete lifecycle. A clear SS strategy will not only encompass direct materials but also
indirect goods and services where quality, shortened and reliable cycle times,
technological capabilities, and services become key negotiation items. A TCO model
would look at “hard” and “soft” benefits (non-monetary). Fig. 8 illustrates where SS may
apply its efforts.
Figure 8 - Direct/Indirect goods and services

Duffie, Tim. (2005). Strategic Sourcing: Building a foundation for success – understanding the difference
between sourcing and strategic sourcing and its impact. UPS Supply Chain Solutions White Paper. Page
8. Retrieved on March 12, 2014 from http://www.ups-scs.com/solutions/white_papers/wp_sourcing.pdf

A SS strategy will generally eliminate the need to focus on transactional and move the
strategy to focusing individuals on higher value activities such as supplier management,
market research, and meeting with internal customers to understand how their needs
are currently being met.
CATEGORY MANAGEMENT AS A SOURCING STRATEGY
There is much debate around the acronyms and words used in procurement, as
mentioned in the introduction. Are Category Management and Strategic Sourcing the
same thing? A LinkedIn discussion suggested a trend
http://www.linkedin.com/groups/Are-Category-Management-Strategic-Sourcing-
771367.S.111919340 indicating that there is no clarification on the question, instead
creating more confusion with little or no clear answer to the question. What is clear is
today’s Category Management (CM) was developed by the Grocery Manufacturers of
America industry and is now being used by a wide berth of organizations representing a
wide array of disciplines and still growing day-by-day. CM under a category manager
uses a cross-functional team to identify product categories and drive category
performance improvements through the application of categories as strategic business
units. Reducing cost is not the end goal of CM. Instead to achieve its goals it must focus
on improving relationships with suppliers in order to understand TCO, reduce overall
category spends and understand its customer. Understanding the customer leads to
maximization of sales, improved customer loyalty and a potentially long term
relationship that benefit all parties.
Category management is the use of strategic sourcing processes and techniques to
optimally source a category and its constituent commodities/sub-categories (Mitchell,
2012). As mentioned Category management is aligned with the life cycle of the
processes that consume the products and services in the categories. Therefore it not
only provides a more comprehensive internal customer and supplier management
approach, but also a broader approach to providing solutions that support category and
business objectives. A world-class procurement organization is looking to safely
harness supply-market power to create a competitive advantage. (Mitchell, 2012).
Category management evaluates the full life cycle of a contract or supplier life cycle, but
also holistically looks at the life cycle of the value chains which consume the goods and
services in the spend categories.

Fig. 9 - Category management: More strategic and holistic than strategic sourcing
Mitchell, Pierre. (April 2012). Category Management: Beyond the “Strategic” in Strategic Sourcing. The
Hackett Group. Page 2. Retrieved on July 21, 2014 from
http://www.mypurchasingcenter.com/purchasing/industry-articles/category-management-beyond-the-
strategic-in-strategic-sourcing/
CM not only organizes processes and resources around supply markets not unlike SS,
but in addition CM sources these market categories, but also manages them on an
ongoing basis. CM involves a clear understanding of the organization’s key value
objectives for the category (based on business objectives) and then develops a set of
executable strategies. If CM is implemented properly it becomes a client-friendly
framework.
CM requires a strong customer management competency and is more of a solution-
assembler role rather than just process executor (Mitchell, 2012) and therefore requires
new processes and capabilities. The capabilities of a CM function become more
expansive addressing relationship management, communications, program
management, change management and leadership. In order to meet the need for these
capabilities strong support from senior leadership is required.
CM can be used in many types of organizations where it is clear that spend
encompasses many types of products or services being purchased. The goal is to
understand your customer, become an expert in regards to their needs, goals and
objectives for the category, their savings targets and the aggregation of demand.
CM provides a number of benefits to the organization as follows (Koester, 2005):

1. It links customer requirements with supply market capabilities. Once you know
what core supplier capabilities deliver your customer requirements you can
identify and work with those suppliers that are "best of breed" in that capability.
2. It enables the business requirements definition or specification to be developed
so that it delivers best value. Defining your business requirements is a team
game in that it identifies both the user requirements and commercial
expectations. A balance between the two is what delivers best value.
3. It ensures that the right skills and experience are applied to the right activity
within the category management process. Category management creates the
critical mass needed to have experts for each of the activities in this process
rather than generalists having to do a wide range of them.
4. It ensures that all relevant spend is included in the category so that your leverage
is maximized. Without category management there is a danger that the purchase
of individual items are spread across your organization in quantities that are too
small to get volume related benefits.
5. It allows you to anticipate and plan for changes in technology. By knowing how
customer requirements might change (and what that means for technology) and
what your major suppliers are planning, you can identify any gaps that might
occur in the future between the technology needed and what is available. Do this
soon enough and you can stimulate your suppliers to do something about it.
Identify supplier innovations early enough and you can help shape the offering
made to your customers.
6. It reduces risk. Creating categories and putting them under the proper
management of experts enables you to spot any trends or developments that
might create a commercial risk and do something to prevent or mitigate it.
7. It develops the right supply capability both for today and tomorrow. This is similar
to the technology reason. If you can get an understanding of what capabilities are
going to change over the next few years and what suppliers plan, you can
influence both.
8. It helps to build good communications across the entire value chain. We should
not forget that value chains are made up of people. Category management gives
you the visibility and opportunity to communicate the right message in the right
way to the right people to get the result you want.
9. It builds trust and co-working across all of the value chain. Trust comes from
delivering your promises and not being unfair. Understanding your categories
means that you can set goals for everyone in the value chain that meet their
needs as well as yours and is within their capability.
10. It ensures that many supply options are considered rather than just the obvious
one. When someone is responsible for developing a commercial sourcing
solution for a user need but they do not have the right experience, it can be too
easy to jump to the first solution that springs to mind. The category management
process ensures that options are considered.
The ultimate goal of Supplier Category Management is to establish deep relationships

with suppliers to gain maximum benefit from sourcing. This can be achieved through a
five-part framework that segments spend, determines category strategy, sets up the
governance for the category, and then executes and monitors performance against
strategy. A few observations help to summarize this framework.
• CM strategy is not the same as commodity strategy as used in SS. Rather it

looks at broader value objectives that will drive value for the categories, as well
as across categories.
• Categories are segmented and structured in terms of lower-level supply
categories, but also organized by demand type creating very succinct groupings.
• Category strategy consists of a well-coordinated set of sourcing, supplier
management, supplier collaboration, and other processes. But it is the life-cycle
activity that is at the forefront, tied to the needs of the stakeholder, customer,
end-user who consumes the product or service.
• CM performance measures the performance of the category management
processes and the stakeholders who participate in them.
• CM also requires stronger emphasis on capabilities within existing SS processes.
This may be able to further unlock additional value through further aggregation of
commodities/categories into higher-level categories.
It is important that procurement organizations not use CM to create an even more

complex version of SS. Procurement needs to communicate how the inputs are
stakeholder business requirements and how the output contributes to improved supply
and business performance.
SKILLSET TO SUPPORT A STRATEGIC SOURCING MODEL?

Giunipero, Denslow & Eltantawy (2004) discuss the need for Purchasing and Supply
Management (P/SM) professionals to acquire a different skillset that emulates an
entrepreneurial behavior. This would require flexibility that would allow them to adapt to
a changing business environment. Fig. 10 illustrates the changing role of purchasing
personnel when shifting to an entrepreneurial skillset. The organization must recognize
the change required and ascertain whether they presently have this skillset or whether
current P/SM professionals can adapt to the changing environment as this would be
crucial to the success of any change initiative in terms of a sourcing strategy
implementation. Barringer and Bluedorn (1999) described entrepreneurship as a
process of “creative destruction”, in which the entrepreneur continually displaces or
destroys existing products or methods of production with new ones.
The required skillset needs to be part of the organizational design and culture in order to
welcome new ideas and allow time to be creative.

Figure 10 – Purchasing’s changing role
Purchasing’s changing role. Adapted from “Purchasing/supply chain management flexibility: Moving to an
entrepreneurial skill set,” by L. C. Giunipero, D. Denslow and R. Eltantawy, Industrial marketing
Management. Volume 34, Issue 6, August 2005, Page 608. Copyright 2005 by Elsevier Inc.
“Engineers who can’t add, operators who can’t run their equipment, and accountants
who can’t foot numbers become purchasing professionals.” Jack Welch, Former CEO of
GE.
General Electric’s legendary boss (Fuchs, Pais & Schulman, 2013) made this
statement, and in some respects this led to the organization under investing in the
purchasing team’s capabilities and to leave sourcing out of the strategic decision-
making process, in favour of functions that drove revenue. It also may have led to less
talent entering the purchasing domain. Yet purchased materials and services generally
add up to 60 to 80% of a product’s total cost. In order to meet the challenges of a SS
strategy senior executive need to raise the function’s profile, provide high-performing
procurement professionals more leadership development and exposure.
In order to improve capabilities a bottom-up assessment of its technical and leadership

capabilities can be made and compared to relevant benchmarks. An assessment of this
type will reveal any short-comings and highlight the need to build on the skills identified.
As well an organization would do well to provide the necessary tools for data-collection
and clear processes to help provide a more strategic direction. This could also mean
that the organization must look to putting the right people in the right roles while
monitoring performance and providing incentives for total cost of ownership savings and
continuous improvement. These steps would go a long way to addressing any identified
skillset shortfall. (Fuchs, 2013)
As well in order to promote capabilities there needs to be a culture instilled that allows
purchasing professionals to be proud of the value they add to the organization while
providing a level of confidence to take on a leadership role that provides new sources of
value. Such cultural change is the bedrock of a sustainable transformation in a
purchasing organization. (Fuchs, 2013)
These steps taken can not only result in a bottom-line impact but much more
importantly can lead to a fundamental change in how the organization is operated.
4. RESEARCH DESIGN AND COLLECTION
As a conceptual paper this research design will be primarily focused on secondary
sources of literature compiled from 1990’s forward. Some of the SS initiatives and in
particular the eclipse of the study of category management principles under SS had
their conceptual origins from this early date. (Harris, 2012) Given the nature of the use
of secondary sources and based on AU Ethics guidelines this research design will not
require submission for an ethical review.
Key search terms used include “Strategic Sourcing”, “Traditional Purchasing”, “Category
Management”, “Sourcing”, “Procurement Sourcing”, Strategic Sourcing SWOT Analysis”
and “Strategic Sourcing Skillset”.
Research literature comes from library databases such as Google Scholar, AB/INFORM
Global, and primarily through a search of online internet resources.
INDUSTRY RESEARCH
SS is experiencing unparalleled growth as a procurement model. (KPMG, 2012) The
KPMG survey of 585 procurement leaders indicates that SS and CM growth has
occurred more predominantly under a centralized model and that there is significant
room for growth of these operating models. Figure 11 illustrates, at least with indirect
spends, that most organizations have yet to lead or excel in these supply chain
functions and drive the inherent value that they can achieve.

Figure 11 – Category Management and Strategic Sourcing maturity for various

operating models (indirect spend)
KPMG. (2012). The Power Of Procurement. A global survey of procuement functions. Page 18. Retrieved
on April 26, 2014 from
https://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/the-power-of-
procurement-a-global-survey-of-procurement-functions.pdf
Although SS is not in its infancy and as the above has illustrated, still not widespread
throughout industry, this research project will show through mainly qualitative concepts
as well as quantitative data that SS is becoming more commonplace in organizations
and therefore requires study outside its initial routes in retail.
The KPMG survey illustrated in Figure 12 indicates that spend under contract as of
2012, a key indicator under SS/CM, is still primarily a retail phenomenon with much
more room for growth in other industries.

Figure 12 – Percentage of Spend (Direct and Indirect)

Has the KPMG data established that there is a trend? Has it clearly established that
industry is beginning or has shifted and adopted SS as a wide model being used
throughout or has it just merely point out that it is a work in progress and that such
change does not occur instantaneously but establishes a foothold that becomes more
pronounced, useful and widely adopted as time goes on. Clearly there are limitations to
data availability or journal articles that speak to the growth of SS, or for that matter CM,
except in the most generalized terms. This limitation may be a direct result of a lack of
importance that SS still plays in key industries or may be because the adoption of its
importance is still not widespread in the industry. Once again according to the KPMG
charts some industries are adopting more quickly than others. It is also interesting to
note that less than 75% of spend is under an active contract.

The KPMG survey indicates that Procurement functions still do not have a strategic role
and generally are still not considered as a true business partner to the organization.
This tells us that organizations usually bring Procurement into the mix either to close the
deal or look at contract terms instead of engaging them in the early stages of the
procurement process. You must wonder whether organizations are making effective
procurement decisions, leveraging their spends and economies of scale and leaving
themselves open to business and commercial risk.
I hypothesize that there is a trend occurring with SS, and that this profession is
migrating its skillset. Identifying this trend will show that SS is having a direct impact on
the organization, raising procurement stature and organizational importance while
improving efficiency; confirming the impact to the bottom line which is a profit driver for
the organization. This is not an easy task given the information currently available on
the internet and what may be construed as the lack of quantitative data to support such
a movement. As we know there is ample qualitative data in the form of opinion. To
answer our questions we will need to look at SS in depth to determine why
organizations are moving in this direction and what has been the impact on the
employer in terms of their needs when advertising for positions in the procurement
profession. What tools have been introduced that take the traditional procurement
professional out of his or her element to qualify SS as an advanced initiative? We will
look at the literature available and provide a chronological review portraying the growth
and maturity of SS as a modern day supply chain management methodology. Just what
SS introduced to the supply chain management discipline that would require a new
breed of purchasing professional with an enhanced skillset and show that certain key
words stress the changes that are occurring, at least from an employer perspective.
To validate quantitatively that there is direction and movement to a SS model this
project will look at a small sample of the current procurement jobs available in the
Canadian market. This sampling will look at the positions being searched for but more
importantly, we will look at, through a keyword search using TagCrowd the propensity of
keywords being used and whether they support that there is a shift to SS or CM as a
strategic model at least in terms of the wants as described through the requirements of
the job description by potential employers. This research may support a shift, or it may
support that titles have only changed or for that matter it may face limitations imposed
by the individuals who write these postings, without knowledge or purpose when
defining the detailed skillset required by today’s procurement professionals. Therefore,
by any measureable means, there will be limitations in the use of such a model to
support a change in direction to an SS model although such an analysis should support
the importance of certain keywords to today’s employers.
HYPOTHESES
Our hypothesis suggests that the prevalence of specific keywords in job descriptions
indicates a shift in the skillset of procurement professionals to a more specific SS
model. This is how we will explain or support the phenomenon that there is a shift in the
marketplace toward SS.

METHODOLOGY
Appendix A – Strategic Sourcing Job Descriptions and Appendix B – Category
Management Job descriptions provide a small sampling of the various positions
available to our research survey as illustrated in the Figure 13 below snapshot.
Figure 13 – Snapshot of Appendix A – Strategic Sourcing Keywords

As you can see the focus is on the Procurement Position, Employer, Location and
Sector highlighting the keywords that are most used, specifically the number of times
the keyword is used within the job description. A quick look at the numbers indicated in
Figure 13 suggests that the keyword “Sourcing” appears 22 times in the job description.
That “strategic” occurs 12 times, “”experience” 20 times and “procurement”, 10 times.
This methodology does have its limitations as we only are looking at keywords that
focus on SS and CM. Not only that the data collected is only as good as the specifics in
the job description and depending on employer and/or writer of the job listing the
keywords can vary from employer to employer as well as province to province. The
number shown highlighted by font size in Figure 13 indicates the actual times the
keyword is used in the body of the job description excluding the title and any other
extraneous verbiage that is not focused on the job description. The job description for
the most part captures profile, roles, responsibilities, qualifications, and education,
extrapolating this data by usage of keywords as illustrated by an example job
description and TagCrowd keyword snapshot in Figures 14 & 15 shown below. This
example shown illustrates the methodology used to capture the data in Appendix C
which is tabulated in Appendix A and Appendix B. Where similar words come up such
as Strategies or Strategic and Supplier and Vendor the resulting numbers have been
combined and totaled to indicate similarity of function.

Figure 14 – Strategic Sourcing Manager – Telus Job Description

There are additional limitations in that we are not looking at the entire verbiage in the
job description nor are we looking at all requirements as some of the words may only be
used one time, or twice so it is important to understand that the roles and requirements
certainly focus on more than the keywords.

Figure 15 – TagCrowd - Keyword Search by Frequency

As you can see in Figure 15, all one has to do is drop in the content into the Paste Text
box, pick your parameters such as number of words shown and frequency (not shown)
and then hit the Visualize button. The program TagCrowd will then extrapolate the
words from the content and display the frequency in which they appear. Our example

chosen in Figure 13 – Appendix A correlates the data displayed in Figure 15, from the
content pulled in from Figure 14, also shown in Appendix C.
We will look at the elements of SS and its key success factors and correlate how the
introduction of new analytical models have put demands on purchasing professionals to
be more educated and skilled at their profession. We will show that SS is not just about
saving money or understanding your spend but that it is also about your customer and
your supplier. And that understanding your supplier requires an understanding
regarding market intelligence leading to the use of a SWOT analysis, where Porter’s
Five Forces Analysis comes into play and how we use the value chain to our
advantage. Finally we will look at where this takes us presently, where it takes us in the
future and whether SS has contributed to purchasing becoming a discipline that is
trusted and understood at the highest ranks of an organization.
5. STATEMENT OF RESULTS
As the saying goes “With knowledge comes power”, author unknown. We may make
assumptions around the KPMG study that elude to a slow but sustained shift occurring
leading to more adoptions of SS throughout the business world. Given that it can take
years to implement a change, technically and culturally, it is not unrealistic to assume
that change will continue. There will progressively be more adoption of SS in
procurement field throughout industry and the skills to provide the deliverables will
continue to grow with procurement personnel at all levels.
The research focused on business job description needs that support a substantiated
viewpoint that certain skills are being asked of procurement professionals. It is meant to
at least point to the procurement professional today being a multi-faceted individual,
well-educated, who understands that SS is only beginning to be nurtured by business,
and aligned as a driver to achieve the strategic business goals of an organization. The
research has pointed to key words being used such as management, procurement,
supplier, sourcing, experience, strategy and in the case with CM a focus on the word
category as well as both espouse contract knowledge. But as our key word search has
shown using Tagcrowd, other words come in our visualization of keywords, such as
systems, execution, development, team, business and ability to name a few. Each adds
further to the identification of a broader skillset to support SS or CM. This research has
revealed evidence that employers are asking frequently through their posted job
descriptions that the procurement professional must have certain skills be part of any
SS or CM role. We may be able to infer from such data that we are moving away from a
traditional, transactional purchasing acumen. Today’s procurement professional is more
attuned to being a business professional with a focus on procurement.
6. ANALYSIS
There are limitations to this research. Did we provide enough historical data that would
tell us that there is a movement to SS and CM? Again we did not look at the other job
descriptions in procurement field that did not use SS or CM in their title. And there are
definitively jobs like this out there, but all they extoll to the writer is that we still have

some distance to go before organizations in general become more proactive in their

adoption of SS and CM. That yes…some organizations are stuck in the past and are
unsure of the value a strategic shift brings to an organization or simply are unaware of
the value strategic procurement can bring to the organization. Given the number of
various procurement type positions, the nature of the industry and the search algorithms
used it would be difficult to pinpoint the percentage of SS and CM positions as a
percentage of the total procurement positions being offered. This is another limitation of
the process being used.
Our analysis has brought forward key words that are more pronounced at various levels
of an organizational chart. A Strategic Specialist does not have or need the same
skillset as a manager and a Manager does not need or have the same skillset of a
Director. But we can also see that the skills tend to be evolutionary and growing as an
individual moves up the organizational divide. From our research we can start the
development of a competency framework that will allow us to see the key words and
their relevance at each level of a career.
THE COMPETENCY FRAMEWORK

We can show how our research has led to a Competency Framework but are limited in
that we cannot show the evolution of this framework over time, as we would need
historical data over a decade to clearly indicate a pattern and shift in competency
requirements. Therefore the Competency Framework subject of our research will show
a moment in time.
The literature review also provides information to support the keywords that are being
used as part of our Competency Framework. We can develop criteria that show that at
each stage of the development of procurement professional, from Level 1 to 5 additional
skills are required in order to meet the needs of fulfilling the role in question. We have
devised our Competency Framework looking at SS individuals starting at a buyer/
specialist and moving our way along the evolution to a Manager and ultimately a
Director, all focusing on Strategic Sourcing. The same can be said for CM but we have
not provided a Competency Framework for such given that CM in essence is a subset
of SS further delineating categories and their spend.
This competency framework will set out the core and technical capabilities that are
expected of an SS or CM practitioner and some if not all the positions they apply to. It is
not the intent of this paper to cover off all procurement positions as it is a vast field that
is in flux and continual changing. And this framework is only meant to be a guideline but
does go beyond mere qualifications focusing on competencies which are a requirement
to master the positions being offered in SS and CM. A competency framework will assist
an organization to identify competencies required to perform SS or CM. As well it will
help identify the competencies for career development. And lastly provide a basis for
identifying competency gaps for the purposes of planning so that an organization will

understand the skill sets required when upgrading to a SS or CM model. The

competency framework is illustrated in Figure 16.

Figure 16 - Competency Framework
Level 1 Level 2 Level 3 Level 4 Level 5

 Strategic Sourcing
Profile  Senior Procurement  Manager, Strategic  Senior Manager,  Director of Strategic
Specialist
 Buyer, Strategic Sourcing Officer Procurement Strategic Sourcing Procurement
Sourcing Focuses on procurement from Understand tactical but also Understands the sourcing strategy Well-developed skills around Develops the process and
a transaction/tactical aspect understands the sourcing needs of from start to finish. Can develop sourcing strategy. Understands provides strategic sourcing
but is beginning to understand the organization. Can follow process, provide tutoring on all process end-to-end and can be an overview for the organization. Is
strategy. Takes on small to process as defined and can do most aspects of process, contribute to advocate for other manager considered the expert around
medium sourcing requests. of the steps required, although may and write policy and evaluate needs. Also a mentor around sourcing strategy and therefore is
need guidance. Sourcing requests performance of subordinates. process providing guidance where always looking for updates and
are large in nature and tend to be needed. trends in the field.
complex.
Strategic
Rudimentary input into Starting to think critically, Has a thorough strategic Leads and develops strategy by Develops strategy and makes sure
strategy. May have taken looking to understand how to viewpoint by providing insight. providing insight and direction that the procurement plan and
some courses tie things together around Works strategically with all advise. Seen as an experienced strategy is aligned with the business
procurement and the business categories and suppliers. team player with strategic needs. Espouses to subordinates
needs. knowledge. the strategic sourcing viewpoint.
Works with suppliers on Further develops relationship Understands the complex Looks to continuous
Supplier with suppliers. Starting to look at arrangement between improvement and Understands Supplier
projects, develops
supplier as crucial link in the procurement and the development of supplier as a relationship management
relationships and Look at supplier as a key
evolution of strategy and supplier partner
troubleshoots problems or procurement. Beginning to understand the member of the team, a
Promotes/encourages
escalates. supplier development strategic implication partner for innovation and
strategic to procurement
and organizational needs.
Procurement Apply basic procurement processes Familiar and comfortable with all Expert on all aspects of Writes policy, sits on senior
to routine procurement situations. aspects of procurement procurement processes, through executive team. Understands and
Awareness of procurement Some experience of negotiation, directs overall procurement
processes. Understands the experience and knowledge. Apply
processes. Involvement in but requires support. Experienced strategy.
components of an output based judgment to determine how best
supporting/administrative capacity, enough to know when to seek help Advises where appropriate to
specification and take the lead on to apply processes to secure best
in line with pre-determined rules stakeholders.
or advice. Draft basic tender procurement aspects as part of a value in any particular set of
and under close supervision. Able Sits on committees and builds the
documentation ensuring cross-functional team. circumstances. Direct and coach
to place orders within the organizational structure and
appropriate terms and conditions Experienced in negotiating high others, command credibility with
framework of national/local training to accommodate the skills
and pricing requirements are value contracts, commanding stakeholders and suppliers.
agreements. Obtains two to three as required on the procurement
included. Ensure tender queries are credibility and respect externally. Determines most appropriate
written quotes for low value goods team.
answered accurately and promptly Mentors, advises and leads team. procurement strategy and makes
or services where no contract & evaluated fairly. recommendations to senior
exists.
stakeholders.
Applied ProjectObtains two to three

– Michael Miszczak 38 | P a g e
written quotes for
low value goods or
services where no
contract exists.

Overall responsibility for the
Management procurement team or category
*Beginning to develop *A good team player that can *Possesses complete
Management experience honed
management skills effectively prioritize workload understanding of how
*Very little management skills by experience and delegates
*Has delegate experience across a department or procurement is aligned to the
although interfaces with responsibility to managers
when manager on holidays number of procurement organization's business
transactional staff performance review of senior
*Understands the need to teams strategy in terms of priorities
*Does not manage directly staff, overall budget and
support colleagues in ensuring *Monitors progress and and needs
*Recognises wider priorities, responsible for meeting
that team objectives are adapts plans to ensure *Is able to agree plans and
can plan work (of a small business goals
delivered objectives are met ensures pro-active
team) accordingly to meet Has high levels of knowledge
*Prioritises own, and any *Aware of the need for, and performance management
team or departmental and understanding of the
team workload in line with the contributes to, continuous against milestones
objectives deliverables and performance of
overall management needs improvement •Identifies, prioritises and
*May seek guidance procurement both within and
and priorities adapts strategic plans to
outside the organization in
ensure objectives and targets
order to meet strategic
are met
outcomes
•Responsible for management
of change within the
procurement function
Qualifications
SCMP Designation
SCMP Designation complete SCMP Designation SCMP Designation
Undergraduate degree Completed Master’s in
Working on Supply Chain Degree or equivalent Undergraduate degree Business Administration
Management Designation experience Working towards Master’s in Completed Master’s in
(MBA)
(SCMP) – taken core courses Business Administration Business Administration
Taken Strategy courses -
Degree or equivalent (MBA) (MBA)
advanced level
experience
5 – 7 years 7 – 10 years 10 + years

Experience 1 -3 years 3 – 5 years
Can apply Trade Agreements Understanding of all Trade Thoroughly familiar with all
to daily work Agreements and can provide trade agreements,
advice on topic Agreement in Trade (AIT),
New West Agreement,
NAFTA & WTO
Decision Making *Key decision maker for a

*Considers broad tactical *Applies analytical *May be a key decision department or
issues, and takes input techniques in decision maker for a department or organization, or public
*Can make tactical from others in the making process organization sector Centre
decisions that impact on development of tactical *Can resolve more *Will make internal or *Will make internal or
their own work directly, decisions that impact a complex issues that cross external policy decisions external policy decisions
while not deviating from work group a number of work groups within scope of legislation within scope of legislation
agreed procedures *Displays sound judgment *Displays sound judgment *Displays sound judgment *Displays sound judgment
*Displays sound judgment

Category Management Understands the principles Understands the principles Undertakes Strategic analysis Experienced in all aspects of
and processes of category of market shaping and including suppliers, supply category management.
Limited role within CM as management and the developing supplier markets and category Effective in promoting the
does not understand the benefits and constraints of capability. Is aware of the research to develop and benefits of category.
complex relationship taking a category importance of data inform category management management to senior
approach. Organize analysis, stakeholder plans. Identifies risks and stakeholders.
around categories.
requirements into requirements, and issues. Identifies and Implements category
appropriate categories and category management instigates collaborative management solutions and
undertake basic spend tools and techniques. opportunities. drive through benefit
analysis. Assist in the preparation of Prepares detailed category realization plans.
category strategies strategies. Strategically influences the
requirement, challenging want
over need.
Project Planning Able to contribute to the Competent to oversee all Able to develop and Suitably qualified and
development of a project facets of the project cycle, review a project plan. experienced to act as a single
plan, including identifying ensuring proposals are Applies project focus point and manage the
Basic understanding of the risks, key outputs and management methodology department’s interest in the
realistic and manage
formulation, key deliverables. Able to identify resource project.
components and use of processes to accomplish full
Able to use basic project completion of the project. requirements. Assess performance costs and
the project plan. planning tools e.g. Gant Feeds back lessons learnt. outputs independently against
Understand the formulation,
charts key components and use of project plan and take
the project plan. necessary measures to
Establish the minimum time improve future outcomes.
necessary to complete a Encourages the application of
project by calculating the the necessary project
longest sequence of management approach and
activities. puts necessary steps in place
to ensure staff are sufficiently
trained
Experienced and skilled in Experienced and skilled in

Relationship Management Interface with suppliers all aspects of pro-active
Identifies resolves and dealing with customers and
and customers in a supplier and customer
records any issues in suppliers at all levels, so that
professional manner on management. Effective in
supplier performance and they feel both valued and
basic issues under satisfied. Commands promoting procurement
Limited escalates where
guidance. influence.
awareness/understanding necessary. customer respect and
Understands the principles Develop and implement
of supplier / customer Provides a consistent, creates confidence that
of strategic and non - high level relationship
relations. professional, and quality excellent service will occur.
strategic customer and management strategies
Supportive/administrative service to customers. Manages strategic and non -
supplier management. that deliver benefits to the
involvement only, under Able to use and generate strategic supplier and
Knows when to seek customer relationships organization. Measure the
close supervision. reports on supplier
support. value added service
performance using effectively. Ensures that
provided. Develops
Supplier Performance benefits to the organization
strategic partnerships with
Management. are fully realized.
key suppliers


Core Competencies
Integrity & Trust Integrity & Trust Integrity & Trust Integrity & Trust Integrity & Trust
Customer Focus Customer Focus Customer Focus Decision & Quality Decision & Quality
Time Management Planning Planning Planning Business Acumen
Communications Interpersonal Savvy Innovation Management Innovation Management
Building Effective Teams Intellectual Horsepower Intellectual Horsepower
Strategic Agility Strategic Agility
Managing Vision & Managing Vision &

Purpose Purpose
Interpersonal Savvy Managerial Courage
Political Savvy
Technical Competencies
Financial Financial Financial Financial Financial
Procurement Process - Legal Legal Legal Legal

Planning
Procurement Process - Procurement Process - Procurement Process - Procurement Process -
Procurement Process - Planning Planning Planning Planning
Tendering
Procurement Process - Tendering Tendering Tendering Tendering
Execution
Market Analysis Execution Execution Execution Execution


Systems Capability Systems Capability Systems Capability Systems Capability Systems Capability
Legal Results Focus Results Focus Results Focus Results Focus
Team Player/Leadership Leadership Leadership Leadership

Results Focus
Organizational Organizational Organizational Organizational

Team Player
Awareness Awareness Awareness Awareness
Role Details
• Focuses on the process of • Is experienced at leading • An organization's most

• Focuses on procurement at • Typically manages multiple
procurement at a the delivery of the required senior procurement
a tactical level but beginning teams of procurement
transactional/tactical level procurement outcomes, professional who leads
to define role as more practitioners
• Responsible for undertaking typically for a small procurement strategy
strategic • Very experienced at leading
basic procurement tasks government agency • Establishes procurement
• Facilitates the process of the delivery of the required
including managing • Has in-depth knowledge of policies and procedures and
developing and managing procurement outcomes,
tendering and quotation their specialist area of is accountable for achieving
contracts or may be typically for a large
processes for low-value, responsibility major organization
responsible for low- organization
low-risk purchases • Has broad knowledge and
value/low-risk to high- • May support the Director in outcomes
• May be involved with value/high-risk contracts experience of the practical • Manages or participates in
the development and
medium to high value and application of current best
• Manages or participates in implementation of procurement planning and
risk purchases under practice developing a wide range of
procurement planning and procurement strategy and
supervision, or in a
developing a wide range of • Has knowledge of the tools programs usually relating to briefs, specifications and
supporting role and techniques used in in commercial documentation
briefs, specifications and the delivery of strategic
• Typically will be in the commercial documentation SS/CM and is competent in outcomes defined by the • Knowledge and experience
process of obtaining the applying them
• Typically will be in the organization is underpinned by one or
competencies/qualifications
process of obtaining the • Possesses the expertise, • Knowledge and experience more procurement (or
appropriate to a more senior competencies and relevant procurement-related)
competencies/qualifications is underpinned by one or
position professional qualifications qualifications
appropriate to a more procurement
procurement professional appropriate to their level of qualifications • Responsible for financial
procurement responsibilities reporting and budget of
• Knowledge and experience procurement group
is underpinned by a • Represents procurement at
procurement qualifications the most senior levels

Competency Framework. Adapted from Morley, Vivienne. (2011). Competency Framework. Procurement.Govt.NZ. Retrieved on May 30, 2014 from
https://www.business.govt.nz/procurement/pdf-library/agencies/procurement-academy/Competency%20Framework%20-%208%20Nov%20final.pdf

7. RECOMMENDATIONS
“Strategy is about being different. It means deliberately choosing a different set of
activities to deliver a unique mix of value. Strategy requires you to make tradeoffs in
competing---to choose what not to do.” (Porter, 1996)
An analysis and understanding of our research questions requires that we develop a
number of recommendations leading to SMART objectives utilizing tools for developing
strategy (Grant, 2008). Most organizations simply put, make money by increasing
revenue usually through price increases or through increasing volumes. They decrease
costs by decreasing the number of employees, reducing the cost of processes/waste
and of course from a procurement perspective, by reducing the cost of goods and
services.
MOVING TO A STRATEGIC SOURCING MODEL
Recommendation #1
Senior management needs to understand the benefits of SS and a broader
CM model versus a traditional purchasing model.
Key Component Objective
Identify the key benefits that would be derived if an
Specific
organization fully moves to a SS or CM model.
The benefits are quantifiable and measured through a return
Measurable
on investment (ROI) and Key Performance Indicators (KPI’s)
Yes – if the organization wishes to provide support in terms
Achievable
of initial resources and funding.
More and more organizations moving in this direction so yes
Realistic
this is realistic
Time-Bound 3 months to complete
Before considering a SS model an organization’s senior executive must understand the

benefits and advantages of procurement’s role in general and what this model brings to
the table. The development of a business case in this regard can help clearly identify
the cost/benefit to any decision being made. The overall goal of any strategic sourcing
initiative is to achieve large and sustainable cost reductions, long-term supply stability
and minimization of supply risk (Deloitte, 2014). SS is not a new process having evolved
from the mid 1990’s but what clearly needs to be pointed out to executive at all levels is
there are clearly defined benefits to an organization over time with the view of
maintaining a competitive position. To be successful with this model a buy-in is required
at the highest levels of the organization and an understanding that SS leadership is
viewed as a driver and equal to any member of the senior leadership team. Many
organizations use SS as a tool to optimize process in order to gain a competitive
advantage, deriving benefits such as follows (QME, 2014):

 Goods and services purchased at lowest possible price or based on best overall
value
 Price stability through reduced cost overruns on contracts in progress
 Assurance of being able to count on solid, reliable suppliers that will not tarnish
your business reputation
 Better utilization of specialized internal sourcing resources
 Concentration of business intelligence on supplier markets, both domestic and
foreign, leading to better decision making
 Implementation of a more efficient process thanks to standardization according to
best practices and to the use of customized information systems
 Development of a three- or five-year strategic sourcing plan integrated in the
company’s overall business planning and objectives
 Definition and reinforcement of a competitive advantage by sustaining the
innovative process
 Structured planning of business continuity and supplier risk management
 Sourcing stability reducing risk of disruption in flow of materials
Therefore SS drives dollar savings, process improvement, improves stakeholder, user,
customer buy-in to results, improves service levels, quality and availability and fosters
supplier innovation and capability. The SS impact on profitability is undeniable in today’s
competitive reality but the success of SS hinges on senior management’s commitment
and on the SS team’s know-how and leadership.
Should the organization wish to go beyond SS and define a broader scope using CM,
Port Macquarie, 2013 indicates that there can be more defined benefits that can be
derived as listed.
 Detailed spend analysis;
 Deliver initial savings typically in the range of 5% - 7% dependent on the
category;
 Ensures all benefits from any awarded contract are realized;
 Reduction or elimination of avoidable spends;
 Consolidates spend across the supplier base per category;
 Highlights the criticality of certain categories to the delivery of outcomes for the
organization;
 Improved ability to manage and exploit changing market conditions;
 Supplier consolidation;
 Leveraging of internal resources;
 Creates value and minimizes procurement risk through increased procurement
planning;
 Improved service levels from suppliers to the organization;
 Stakeholder buy-in to the process and results;
 Enables supplier capability development.
Many of the benefits are similar and are somewhat dependent on where you place your
emphasis, either SS or its sub-category CM. Achieving the maximum benefit from CM
model may depend on whether you move from a decentralized to a centralized model if
your organization has multiple facilities or business units. CM seems to thrive on a
centralized model by allowing an organization to leverage their corporate spends across
the entire organization, drive standardized purchasing while ensuring standard
tendering and contract processes. Of course a centralized model does have some
disadvantages and will not meet the needs of all organizations. One major disadvantage
is the lengthened procurement process cycle due to the number of requests being
envisioned and complexity created by doing process on a larger scale. In actuality, most
effective models tend to be a mix of centralized and decentralized models.
As mentioned a CBA is another management tool that can be used when developing a
business case to support a go/no go decision. CBA is a useful tool in aiding the decision
making of a project (O’Grady, 2013). Positive factors minus negative factors equals
project viability or the project success probability, equally as important when making a
decision amongst the many other uses this tool has. It can help define objectives and
put in place metrics to define success. And we must be clear that although there are
many benefits to moving to SS and there are certainly costs as well. The expectation is
that procurement will derive benefits almost immediately for any organization even as
they build this new model. We will need to understand the following (The Management
Tip, 2014):
• Understand the cost of status quo. You need this to measure the relative merit of
an investment against the "do nothing" option.
• Identify costs. Consider up-front costs as well as any in future years.
• Identify benefits. Ascertain what additional revenue will come in from the
investment or other quantifiable benefits.
• Determine the cost savings. What can you stop doing if you make this
investment?
• Create a timeline for expected costs and revenue. Map out when the costs and
benefits will occur and how much they will be, and lastly
• Evaluate non-quantifiable benefits and costs. Assess whether there are
intangible benefits such as strengthening your firm's position with your
stakeholders and/or suppliers, or costs such as creating unnecessary complexity.
Whether a private or public organization, organizations have been forced through a loss
of revenue, budgetary constraints or through recession to tighten their belts. And look to
other means to provide better overall efficiency or to reduce costs. And this is where a
change to SS or CM can be very beneficial to an organization assuming we can get
senior leadership to understand the positive impact SS can have on their budgets and
costs over a short period and that there is no gain without a little bit of pain, sometimes
a great deal of pain. As we have mentioned, SS can rationalize the sourcing process
from a holistic total cost perspective (Accenture, 2012).

Recommendation #2
Undertake an assessment of the current state of the organization’s
procurement capabilities.
Are we prepared to move to an SS model under the current
Specific
organizational structure?
Provide a high level SWOT analysis of current state and
Measurable
undertake a gap analysis.
The tools should provide guidance and allow us to ascertain
Achievable our capabilities logically. By providing workshops, surveys,
questionnaires and a capability assessment.
A realistic view will be achieved allowing for a plan and
Realistic
structure to be put in place to move us forward.
Time-Bound 6 month target for completion from start
A capability assessment can be determined by asking questions around a number of building

blocks in order to gauge maturity of the organization’s capabilities. The building blocks would
represent the following and be graded from 1 to four with 4 being the highest level of maturity.
The building blocks looked at were: 1. Leadership and influence, 2. Procurement strategy and
organization, 3. Process and Governance, 4. People and Skills, 5. Supplier Management, 6.
Use of technology, 7. Sourcing and Collaboration and 8. Triple Bottom Line (TBL) (Port
Macquarie Hastings, 2013). Figure 17 provides a visual representation of the grading.
Figure 17 – Procurement Maturity Model

Port Macquarie Hastings. (September 2013). Procurement Strategy. Retrieved on August 12, 2014 from
http://www.pmhc.nsw.gov.au/files/assets/public/about-us/what-council-does/working-with-
business/procurement-strategy.pdf
Further to this point, a full capability assessment must be developed using a SWOT analysis of
the current procurement practices. Given that most organizations have varying procurement
models in place in some form, some simple and traditional and some very complex, the
situational analysis as part of this research paper is general in nature. It does however provide
insight into the type of SWOT analysis that may be envisioned. Remember what we are trying to
do is determine the current state of an organization’s procurement department in order to derive
a strategic procurement plan going forward. In order to do so we need to know where we are
presently and what we will need to put in place to get us to the next level, in terms of processes,
tools and capabilities. The below analysis can help us to answer some of these questions.
Positive Negative
Strengths Weaknesses
* Established processes & procedures; * Large number of suppliers to manage;
* Existing centralised procurement * Large number of staff to re-train;
model;
* Political support; * Poor use of technology;
Internal
*Senior Management support; * Regional location;

* Robust budget development process; * Lack of procurement planning;
* Limited performance against contract
reporting available;
* Limited visibility on total procurement
spends;
* Limited understanding of & experience
in operating with a commercial focus
* Savings in dollar terms; * Staff resistance to change;

* Productivity gains; * Lack of internal political will to support
implementation of the strategy;
* Improved use of technology; * Limited time to achieve long-term
results;
* Supplier rationalization; * Lack of resources to implement the
procurement strategy;
* Improved contract management * Lack of competition between
External
capabilities; suppliers;
* Supplier development at a local and
regional
level;
*Potential to collaborate with other
organizations;
*Leading edge to drive greater
commerciality
throughout the organisation
Opportunities Threats
Figure 18 – Traditional Procurement SWOT Analysis

Recommendation #3
Develop a SS/CM implementation and procurement plan for the organization

Specific To make sure a SS or CM model can be implemented
successfully and strategically
Measurable Milestones will be determined and monitored to ensure
progress.
Achievable Yes – achievable but requires a plan and commitment by
organization and is time based.
Yes – but may need the help of a consultant as support or
Realistic
project manager
Time-Bound Completion over 3-5 year plan.
The key to any successful change in an organization is to develop a concise action plan
with a roadmap that will allow you to successfully implement your strategy. Without this,
success cannot be guaranteed and a roadmap in itself will also not guarantee success,
just allow us to estimate completion times for each segment of the project. As well, any
organizational plan requires a timeline and above all senior management buy-in for the
long term. Meaning, there will be occasions when things may not seem to be going well
but the organization must persevere in order allow the plan to run its course. Should the
obstacles become too great than management may need to re- evaluate and reconsider
the change or change direction.
To start with an organization must understand their value proposition. A value
proposition increases the chance of senior management support and of funds being
provided, reduces the resistance of stakeholders and possibly the most important
aspect, provides clear direction to procurement staff has to what the organization is
trying achieve. As an example Health Shared Services BC’s (HSSBC) value proposition
spoke to reduced cost, reduced risk, increased predictability, increased capacity and
increased opportunity, all noble attributes to strive for (HHSBC, 2012). In addition they
added service quality, customer focus, continuous improvement, value for money,
evidence based improvements, outcomes oriented and a commitment to employees.
This value proposition is aligned to the vision and business goals of the organization.
Therefore the objectives of a business-wide procurement strategy include:
1. Alignment of purchasing objectives and outcomes with the approved
organizational vision,
2. A focus on value for money being sought through purchasing activity, and
3. Robust probity and accountability for purchasing outcomes (NZ Transport
Procurement Manual, 2009).

This strategy will ensure that procurement practices contribute to the organization’s
vision and objectives, help obtain value for money from all purchasing objectives, help
manage suppliers, manage risk around purchasing activities, and allow for the best
quality of goods and services to be obtained.
According to Lynch (2013), procurement planning is the process of deciding what to
buy, when and from what source while the Procurement Plan is the product of the
procurement planning process. It is developed for a particular requirement, a specific
project or for a number of requirements for one or more organizations.
The NZ Transport Procurement Manual broadly implies that a procurement strategy should be
dynamic and updated regularly. It should consider the following areas:
• What is being purchased and why?
• What is the extent of competition in the market?
• What is the capacity and capability of the market to deliver the outputs?
• What is the capacity and capability of the approved organization to manage the
procurement activity?
• How is it to be purchased, including the selection of a procurement procedure and its
components (i.e. delivery model and supplier selection method)?
A procurement strategy should not be complex; it should be fit-for-purpose and must achieve
the desired outcomes. A step-by-step process for achieving this goal would look something like
this.
1. What are the organization’s strategic objectives and its desired outcomes and where can
procurement fit in to achieve them. Procurement planning must reflect the organization’s
vison, mission and value proposition as we previously discussed. Other key objectives are
to enable continuous improvement, provide efficient and effective processes, implement
effective risk management practices, enhance procurement capability, be accountable,
establish economic and sustainability targets and put in place effective performance
measures. Define the barriers to competition and understand how to reduce them.
2. Plan the upcoming procurement understanding the requirements and demand. Depending
on the volume and type of demand you may require a complex or expedited process.
3. Understand the procurement environment by initiating an environmental scan of the market.
There are three important areas to analyze.
• The supplier market,
• The organization’s current spend, and
• The impact on the competition that uses the same supplier market.
As well does the market have the capability and capacity to supply your needs? Who is in
the marketplace? Are there any impediments to supply based on physical geography and
will your outcome enhance or provide efficiencies in the market place over the long term. A
procurement strategy will address the risks and benefits that the market may provide and
there are multiple ways to acquire this information whether from current and potential
suppliers, other organizations or by drawing on past experiences.
4. Understand the delivery methodology for the requirement being anticipated. All of the
information gathered to date should be brought to bear including outcomes, characteristics
and the environment. In a CM model you may categorize the requirements based on the
type of demand. At this stage we need to understand how to bring value for money. We can
do this by looking at the TCO instead of the lowest cost, by reducing the number of suppliers
thereby driving efficiency of selection, help others to enter the market thereby increasing
competition, identifying the optimal delivery option for the good or service, reduce the total
costs incurred by the market in responding to tenders and leveraging other organizations
spend by aggregating volumes. We may also use procurement to drive a sustainable
competition by just not looking at price but also innovation and better service levels.
5. Implement the procurement strategy. An implementation would need to consider the
following:
• Consideration of the approved organization’s capability and capacity to deliver its
procurement process consistent with the strategy,
• Consideration of the approved organization’s internal procurement processes,
• Implementation of a performance measurement and monitoring framework,
• Establishment of a communications plan, and
• Obtaining internal approvals for the strategy.
We must understand that in order to obtain best value for money, an organization must have the
right skills in order to deliver the procurement requirement; otherwise an organization could face
financial and operational issues due to complex and lengthy requirements processes. Where
appropriate, procurement should engage the supplier market from the onset of any strategy as a
partner.
There is much to consider when developing and implementing a procurement strategy and no
one plan fits all requirements. But as an organization who is developing a model there is a plan
that will work for you and provide the results to drive the benefits that come from such a
strategy.
PROCUREMENT SKILLSET AND THE SS MODEL
Recommendation #4
Develop key employee skill capabilities concurrently with SS processes and
tools.
Specific Train employees at all levels to ensure capabilities match
processes being put in place.
Measurable Milestones will be determined and monitored to ensure
progress.
Achievable Yes – achievable but requires a plan and commitment by
organization.
A professional organization has been engaged and training
Realistic
for various processes being developed.
Time-Bound Completion over 3-5 year plan.
An effective SS requires that an organization balance processes, organizational

capabilities and technology (Rose & Oser, 2005). In other words you need to make sure
that you put in place standardized processes with the tools to deliver them effectively
and efficiently while making sure you have the appropriate number of skilled personnel
in place.
Figure X – Processes, Organizational Capabilities and Technology
Archstone Consulting. (November, 2005). Advances in Strategic Sourcing and Procurement. Slide 4.
Retrieived on August 1, 2014 from http://wenku.baidu.com/view/fb2d8f53f01dc281e53af0f2
Few strategic procurement groups achieve this balance. Over 40% of organizations
cited organizational capabilities as a significant obstacle to driving value. So why are
capabilities lagging? Many organizations have developed processes and technology at
the cost of organizational capabilities. In order to alleviate this issue an organization
must focus processes and analytical skills, deploying the right people at the right level
and by extending the procurement footprint throughout the organization. It is important
firstly to strengthen supply market analysis and supplier relationship management skills
while building consistent analytical tools, Secondly there should be focus for the
workforce on strategic initiatives and a cross-functional team structure driving efficiency
within the organization. And finally procurement needs to extend its reach across the
organization forming relationships with not only the supplier but also constituents like
stakeholders and customers.
“People side” factors contribute to, or limit, the value a change delivers to an
organization (Prosci, 2014). Once again a cost-benefit analysis can be a powerful tool
when discussing the value and importance of change management and its return on
investment (ROI). We have pointed out that that new skills will be required to drive SS
and CM, skills that may not currently be imbedded in an organization considering a
change. A change requires individuals to do their jobs differently, it is how effectively
those individuals make the change that determines the business value a change to SS
or CM delivers to an organization. From a people perspective there are three ROI
factors to consider:
• Speed of adoption - How fast do people adopt the new processes or behaviors?
• Ultimate utilization - How many impacted employees made the change (and how
many did not)?

• Proficiency - How effective were employees at following the new processes or

behaviors?
Armstrong & Daft in their book Organizational Change and Theory indicate that when an
organization goes through a change in structure that the planned change based on
Theory E which speaks to economic value, or shareholder value (Wheatley, 2006) can
lead to downsizing and dismissal of employees. Ironically while workload increases in
order for an organization to achieve competitive advantage, develop human resources
skills and to emphasize to stakeholders and customers alike that the commitment to
change will continue unimpeded. It is only in the latter years of the change cycle that
organizations move to a Theory O model which addresses the organization’s human
capability where they focus on organizational development by integrating the interests
and needs of the individuals to the collective interests of an organization. By this time
they have weeded out the resources that will not be able to fit or succumb to the change
occurring and this is where training and development begins to kick in full throttle. Again
the writer experienced such a change management at HSSBC, an innovator in
healthcare.
The demands for procurement professionals will increasingly become more complex
(CIPS, 2012) with greater analytical and technical requirements. They will need to be
competent internal networkers, data analysts, developers of global supply bases and
attractors of innovation. CM will require an entrepreneurial streak and strong leadership
skills. The profession will need people who are culturally aware, collaborative and who
have developed strong leadership teams capable of spanning all needs. As
procurement becomes more firmly embedded in the organization leadership programs
will be needed and job rotation will become a requisite in order to become cross-
functional. Having the right people in the right place with the right skills allows an
organization to gain a competitive advantage and defines the organization’s strategy.
Some liken a procurement role in today’s world as a culmination of several roles
(Kohler, 2006).
8. CONCLUSIONS
Innovation in procurement has taken us away from traditional, reactive purchasing, to
tactical purchasing and then moved us towards SS and CM. The future will lead us to
further innovation down the road in order to make the “strategic” in SS and CM count for
more.
This paper has shown us that there is a great deal of information available on the
internet to support the direction of our paper and the relevance of our questions. There
is a vision for procurement but as we have seen in this paper there is not wide-spread
acceptance of the new norms and what they bring to the table, but instead we see a
slow evolution to SS and CM. There obviously is reluctance or a total disregard to the
potential benefits. Senior management from small to mid to large companies must begin
to realize the important benefits that a SS or CM strategy can bring to an organization
not unlike many progressive organizations have already done.
KEY FINDINGS
Our paper went to the marketplace in order to come up with some data that supported a
shift to SS and CM. There is no question that many procurement positions focus on SS
and CM, but we were unable to quantify how many positions in procurement as a
percentage SS or CM contributed. This was definitively a limitation, however we were
able to quantify the propensity of keywords used that pointed to SS. Our findings tell us
employers are looking for advanced skillsets and a competency framework helps to
back up these findings. Procurement has evolved to become more strategic and where
there is a need to categorize, has done so through CM. We were also able to point out
that a skillset in SS or CM is much more broad and requires more attributes and higher
knowledge and that there are key benefits to an organization should they begin the
journey to move to SS or CM, depending on their requirement.
STRATEGIC COMPLEXITY
Any SS plan goes well beyond the norms that traditional purchasing would envision.
And therefore requires a thorough analysis of SS from initiation to final outcome. This
total management concept requires that the purchasing professional use tools that
currently exist in order to facilitate this process. As mentioned in our paper and by this
writer this may encompass an analysis using tools such as a SWOT analysis, Porter’s 5
Forces, the Kraljic matrix (segmentation analysis), CBA, GAP analysis and
environmental scan as well as understanding risks any organization may face should
they move to a SS model or the risks faced should they maintain status quo. Our results
have shown that moving to an SS model garners any organization a more modern view
of procurement, its strategic input, its role moving forward, and the essential contribution
to the value chain potentially encompassed in a SS framework. Dominick, 2011 states
that SS is not just about saving money, although it is important. To truly be strategic you
must focus on the following:
• Reduce Risk – As a procurement professional you must ensure continuity of

supply in the face of unexpected disruption due to natural disasters, political
upheaval or any other event.
• Improve Supplier performance – Strategic sourcing is successful when you
achieve cost reductions and an improvement in supplier performance.
• Innovate using the Supply Base – through a good sourcing process suppliers can
facilitate innovative ideas.
• Support the organization’s social responsibility goals – Any strategic sourcing
should consciously support the organization achieve these goals.
PEOPLE AND WORKFORCE
Given the risk regarding human capital any recommendation needs to address how we
are to deal with people and the workforce. As we have shown, all organizations must
assess competency, identify shortcomings through a gap analysis with the development
of a competency framework. We have identified potential gaps and therefore in order to
achieve maximum benefit a concise SS model inclusive of CM we must address the

development of standard roles and responsibilities with an organization. It is important
to maintain, sustain and ensure continuity of procurement capability by providing
procurement professionals with a career path in order to mitigate attrition and
knowledge loss while maintaining the development of our human capital, something that
is crucial to long-term procurement sustainability. We understand that procurement
does not have all the skills needed but we have also tried to mitigate this by showing
how we can obtain them, where they are needed and what kind of skills are required.
Clearly as we migrate our strategies as a business and anticipate a larger role with
procurement, any strategy needs to enshrine People, Processes and Technology as
they are critical to each other.
THE FUTURE
This paper identifies why organizations continue to move to a SS model, what inherent
limitations are exposed, what benefits are produced through this evolution, whether
procurement professionals are ready to adapt or for that matter what are the
shortcomings. And will the return on investment produce a sustainable model going
forward that meets the needs of the organizations, their customers and the procurement
professional who will inevitably lead the charge. But what is the model beyond this
paper. Well we have touched on supplier relationships as being important. Minter, 2013
says that we need to look beyond Strategic Sourcing, not that it is not a successful
model. But he espouses that an organization, specifically procurement should engage
suppliers in order to benefit from a more collaborative and transparent relationship, from
cradle-to-grave so to speak. Chad Autry, Professor at University of Tennessee writes:
“Developing collaborative relationships with suppliers and customers is a game changer

because so few firms really accomplish true win-win partnerships. But the few that do
have experienced dramatic and even breakthrough improvements in product availability,
cash flow, cost, and shareholder value.”

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APPENDIX A: STRATEGIC SOURCING JOB DESCRIPTION KEYWORDS
Strategic Sourcing Keywords

Employer / Strategic Supplier - Management
Procurement Position Location Sector Sourcing Experience Skills Procurement Contracts
Headhunter (Strategies) Vendor / Managing
5 5 5 - -
Buyer, Strategic Sourcing Atco Alberta Construction 7 4 4
Director of Strategic - - -
Michael Page Ontario Financial 6 5 2 4 2
Procurement
Director, Enterprise - - - -
Economical Ontario Insurance 7 9 4 9
Procurement
- 6 - -
Director, IT Procurement RBC Ontario Financial 3 3 8 4
Manager Sourcing- MD-Physician 3 - 3 2
Ontario Healthcare 11 8 6 4
Procurement services
Manager Supply Chain Enbridge - - - - -
Alberta Oil & Gas 6 13 17
Management Pipelines
Manager, Procurement - Johnson & - - -
Ontario Pharma 6 5 9 5 5
Strategic Sourcing Johnson
Manager, Strategic Bank of - 13 - -
Ontario Financial 27 24 17 20
Sourcing Montreal
Manager, Strategic 4 - - -
Scotiabank Ontario Financial 11 7 8 5
Sourcing
Manager, Strategic Johnson & 2 -
Ontario Healthcare 3 3 3 8 5 4
Sourcing Johnson
3 8 - 2
Procurement Specialist Bayer Inc Alberta Pharma 4 10 4 5
Brookfield Real Estate - - -
Procurement Specialist Ontario 8 7 4 8 4
Johnson Management
Senior Manager, Strategic Ontario - - -
Ontario Energy 9 8 5 11 5
Sourcing Power
Senior Manager of
Michael Page Ontario Financial 8 3 2 6 3 6 3 2
Strategic Sourcing
Senior Procurement First West British 5 - 5 5
Fiancial 8 6 15 10
Officer Credit Union Columbia

Strategic Sourcing Keywords

Employer / Strategic Supplier - Management
Procurement Position Location Sector Sourcing Experience Skills Procurement Contracts
Headhunter (Strategies) Vendor / Managing
Sourcing Manager - Maple Leaf -
Ontario Food 9 4 9 5 4 5 4
Capital Equipment Foods
Specialist – Strategic - - -
SNC-Lavilin Quebec Construction 4 4 4 7 4
Sourcing Indirect
Price HVAC -
Strategic Sourcing Buyer Manitoba 2 3 4 5 2 3 4
Industries Manufacturing
Strategic Sourcing 6 8 -
telus Alberta Communication 22 12 14 20 10
Manager
Strategic Sourcing JD Irving - - - - -
Alberta Food 4 5 1 2
Manager Cavendish
Strategic Sourcing 4 4
Pembina Alberta Oil & Gas 7 13 12 7 5 4
Specialist
Strategic Sourcing Shared 2 - - -
Ontario Healthcare 6 4 5 3
Specialist Services
Strategic Sourcing River Rock British - - - - -
Gaming 14 6 7
Specialist Casino Columbia
Strategic Sourcing British - -
Avcorp Manufacturing 4 12 6 5 5 6
Specialist Columbia
Strategic Sourcing British Airline -
Avcorp 6 4 12 7 4 4 6
Specialist - Technical ColumbiA Manufacturing
Transportation - - -
Supply Chain Manager Aveda Alberta 2 4 9 3 3 2
Energy

APPENDIX B: CATEGORY MANAGEMENT JOB DESCRIPTION KEYWORDS
Category Management Keywords

Employer / Supplier
Procurement Position Location Sector Category Product Strategy Management Contract Business Sourcing Procurement
Headhunter - Vendor
Category Development Manager Safeway Alberta Retail - - - - -

6 5 3 3
Category Lead 2 – Acute Surgical Health Shared Public Sector -
British Columbia 15 - - - - -
Intervention Services BC Health 26 31 16
CATEGORY MANAGEMENT,
Cameco Sasketchewan Mining - - - - - -
TRANSPORTATION 6 4 8
Category Manager Rexall Pharma Ontario Retail 10 7 5 7 9 - - - -
Public Sector - - 6 4 -
Category Manager Metrolinx Ontario 13 9 8 9
Transportation 16
Category Manager - Household, Pet and
Shoppers Drug Mart Ontario Retail - - - - - -
Stationary 12 9 11
Workplace Safety & Public Sector - - - - 9 11
Category Manager - IT Ontario 19 25 24 12
Insurance Safety
Category Specialist InSync Alberta IT Solutions - 7 7 9 8 -
20 11 21
Category Specialist Staples Ontario Retail 4 9 - 8 7 - - - -
Public Sector - - 6 3
Director, Category Management Ehealth - Ontario Ontario 8 7 9 10 7 8
Health
Global Category Manager KGHM British Columbia Mining - - -
5 3 3 5 6 3
Manager Category - Procurement Sobeys Ontario Retail 7 6 5 - 7 - - - -

Construction - - - - -
Manager Category - Procurement Holcim Ontario 9 5 5 5 4
Building Materials
Ontario Lottery & Public Sector - 6 - - - 6
Procurement Category Specialist Ontario 7 12 15 10
Gaming Lottery & Gaming
Davies Turpin & - - - 5
Product Category Buyer Alberta Industrial products 6 16 10 12 6
Associates
Senior Category Manager CIBC Ontario Financial Services - - - - -
7 12 5 7

Category Management Keywords

Employer / Supplier
Procurement Position Location Sector Category Product Strategy Management Contract Business Sourcing Procurement
Headhunter - Vendor
Senior Category Manager Loblaw's Ontario Retail - - - - - -

12 6 8
Transport & - -
Senior Category Manager - Indirect Spend WestJet Alberta 3 6 10 3 5 3 6
Logistics - Airline
Senior Director,Supply Chain and Category Saskatchewan Liquor Public Sector -
Sasketchewan 3 - - - -
Management and Gaming Authority Liquor/Gaming 4 5 5 8
Public Sector - -
Senior Manager, Catgegory Management Metrolinx Ontario 6 6 6 11 5 3 6 6
Transportation
Software Category Manager Aviva Ontario Financial Services - 7 11 11 7
19 15 29 19
Strategic Category Manager Graham Alberta Construction - 3 4 -
5 5 7 7 5
Strategic Sourcing and Category Specialist
Shaw Alberta Communications 3 - 4 4 -
(Technical) 9 7 9 6

APPENDIX C: DATA ON JOB DESCRIPTIONS
2014-07-20_JobData
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Strategic Sourcing: A Paradigm Shift in Supply

Student Name: Michael Miszczak

Assignment Title: Applied Project - Final Proposal

Word Count: 15, 305

Submission Date: August 31, 2014

Applied Project Coordinator: Teresa Rose. PhD

AP Supervisor: Paul Larson. PhD

2. THE RESEARCH QUESTION....................................................................................................7

DEFINITION OF KEY TERMS USED ............................................................................................. 7

THE DELIMITATIONS AND LIMITATIONS ................................................................................... 9

3. LITERATURE REVIEW ..............................................................................................................9

BACKGROUND TRADITIONAL PURCHASING......................................................................... 10

WHAT IS STRATEGIC SOURCING? ...........................................................................................11

MICHAEL PORTER’S 5 FORCES MODEL......................................................................... 14

SEGMENTATION ANALYSIS (KRALJIC MATRIX) ...........................................................15

WHY MOVE AN ORGANIZATION TO A STRATEGIC SOURCING MODEL? ......................16

CATEGORY MANAGEMENT AS A SOURCING STRATEGY .................................................23

SKILLSET TO SUPPORT A STRATEGIC SOURCING MODEL? ........................................... 26

4. RESEARCH DESIGN AND COLLECTION .............................................................................28

INDUSTRY RESEARCH .................................................................................................................28

5. STATEMENT OF RESULTS ....................................................................................................35

THE COMPETENCY FRAMEWORK............................................................................................36

MOVING TO A STRATEGIC SOURCING MODEL .................................................................... 44

PROCUREMENT SKILLSET AND THE SS MODEL ................................................................. 51

Final Proposal – Michael Miszczak

KEY FINDINGS ................................................................................................................................54

STRATEGIC COMPLEXITY ........................................................................................................... 54

PEOPLE AND WORKFORCE........................................................................................................ 54

THE FUTURE ................................................................................................................................... 55

APPENDIX A: STRATEGIC SOURCING JOB DESCRIPTION KEYWORDS...........................61

APPENDIX B: CATEGORY MANAGEMENT JOB DESCRIPTION KEYWORDS ....................63

APPENDIX C: DATA ON JOB DESCRIPTIONS ........................................................................65

Final Proposal – Michael Miszczak

• Better value by obtaining cheaper pricing,

2. THE RESEARCH QUESTION

Reactive Purchasing – This is a procurement approach where no proactive sourcing

Sourcing - Sourcing is the proactive management of a supply market to ensure access

Strategic Sourcing (SS) - Defined as an institutional sourcing and supplier management

Sustainability in Procurement - Refers to using procurement to deliver long term social,

Tactical Purchasing – A subset activity of SS focusing on operational purchasing

Applied Project – Michael Miszczak 8|Page

Traditional Purchasing – Involved requisition, soliciting bids, purchase order, shipping

THE DELIMITATIONS AND LIMITATIONS

Applied Project – Michael Miszczak 9|Page

place a strategic sourcing and competency framework that validates a procurement

Figure 1 – Strategic Sourcing is Evolving

Applied Project – Michael Miszczak 10 | P a g e

WHAT IS STRATEGIC SOURCING?

As well (Engel, 2004) states that SS is an organized and collaborative approach to

Category Management (CM) focuses on managing contracts to ensure that the

It is as well data intensive and analytical in character and speaks to understanding

Applied Project – Michael Miszczak 11 | P a g e

Figure 2 – 7-Step Strategic Sourcing Process

Figure 3 – SWOT analysis of business-critical software requirement – Ilustrative only

Applied Project – Michael Miszczak 13 | P a g e