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Leading companies have recognised that strategic procurement can play a key role in driving profitable growth and become a source of value – added to their business designs. For this purpose, they have been re-examining their supply base to minimize linked costs and maximize the value of goods and services for their consumers.
For an organisation of your choice that you are intimately familiar with (please no Apple, Zara, Walmart, Tesco or similar, unless you work there!), you are asked
- to critically examine the sourcing methods and supplier base
- to propose a strategic source framework which can lead to procurement excellence and value growth
Economic growth as well as environmental impairment and disregarded social aspects are the characteristics of industrialisation. This has increasingly given rise to the adoption of corporate sustainability practices which set indicators for the evaluation of the impact of organizational activities on its stakeholders. As companies tend to implement the triple bottom line in their management strategies, corporate sustainability is used in relation to the competitive advantage it offers. The key emphasis is laid on achieving market continuity and organizational growth in terms of economic viability and societal coexistence.
Under the dynamic market environment, procurement activities are given strategic importance. This allows procurement function to play a major role in attaining strategic corporate goals which has a significant influence of delivery and lead times, operating costs and quality, which are fundamental components of operations strategy of a company. The strategic procurement function plays the role of directing sourcing activities to achieve corporate objectives and reaches long-term goals, thereby offering a competitive advantage for the company. The supply chain of organisations has become an integral part of corporate sustainability practices. At the same time, the role of procurement as a key lever for sustainable supply chain management, engagement and transformation is growing.
In this report, the role of strategic procurement practices adopted at one of Australia's leading mining companies, BHP Billiton is analysed. Operating in a resource-based industry BHPB adopts a strategic management approach to conduct its procurement operations. BHPB manages a world-class supplier program which aims for the development of the local businesses and capabilities which offer sustainable economic opportunities for suppliers. Through a set of control frameworks, BHPB manages its supplier base to achieve a sustainable supply chain. BHPB is a pioneer in implementing e-Procurement to make faster and efficient purchases and manage supplier relationships. Through theoretical analysis a framework is proposed for BHPB to overcome challenges arising from its strategic procurement practices involving technological solutions to gain competitive advantage.
Supply chain comprises of activities ranging from raw material conversion to delivering finished products to customers (Mello, Eckhardt & Leiras 2017). Procurement activities are carried out a number of times throughout this process, which results in the transformation of costs and creating wastes across the supply chain. A Sustainable and strategic procurement function has become a primary agenda for purchasing and supply managers who pursue avenues for corporate social responsibility through their business function. Gradually, procurement management is emerging as a strategic priority for companies to gain a sustainable competitive advantage under changing market conditions (Walker et al. 2012). Considering the currently prevailing dynamic market environment, procurement is given prominence in the integrated business process with a shift in its focus from cost reduction to value creation. In this report, the sourcing methods of BHP Billiton, a leading mining company is Australia are analysed based on theoretical concepts.
A review of literature reveals that there is a shift in the procurement processes from cost conscious conventional approaches to strategic procurement for sustainable competitive advantage. The adoption of strategic management initiatives in the procurement function through resource-based theory, development of category management, adoption of e-procurement for performance enhancement and supplier relationship and procurement project risk management measures in a dynamic environment are discussed. Based on this, a framework is proposed for BHPB to ensure that its procurement strategies remain sustainable with the implementation of new technology innovations.
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