My Process for Building Strategy in Procurement

I interned with a Fortune 500 Chemical Company this summer in their Raw Material Procurement department. My project for the summer was to build a raw material strategy for a business line.

? This project allowed me to connect with suppliers around the globe, giving me incredible exposure to meeting and talking with international suppliers. While creating this strategy, I had to take various?steps to ensure I effectively communicated this strategy to my managers and the Chief Procurement Officer. To prepare, I read multiple books on strategy that helped set my mind for the types of planning and analysis needed and what the framework should look like.

What I learned is that it is imperative to have proper planning and analysis and sketch a framework for my thought process and presentation.

??????After several meetings with my supervisors, we derived the following framework (excluding title and transition slides).

• Slide 1 – Problem Statement
• Slide 2 – Raw Materials Costs and Composition
• Slide 3 – Overall Business Line Market: Supply, Demand, CAGRs, Utilization, Competition (using Porter's 5 Forces; Competition in the Market)
• Slides 4-21 – For each material

·??????Raw Material Market

·??????Raw Material Supplier Evaluation and Capacity

·??????Raw Materials Strategic Action (the execution aspect of the strategy)

• Slide 22 – Overall Actions

Dissecting and Providing Insight

Besides laying out the framework, there was quite a bit of work just understanding the business, competitors, raw materials, and suppliers. Once I concluded my research and analysis, I needed to make sense of the information.

Analyzing the raw material data, I studied each approved supplier's pricing, location, and surety of supply. Once I knew how to research, collect and analyze the data, I could scale the process out for the other materials and batch collecting data if the supplier produced more than one of our materials.

I utilized charts and graphs that showed who the suppliers were for each raw material and how the supply impacted overall utilization relative to projected demand.??These visuals give a clear insight into the supply and demand situation, and it is easy to perceive how those markets will be impacted by higher demand or added supply.

Logistics costs have been the biggest hurdle coming out of the Covid regulations. In the past, suppliers have been able to pick up logistics costs most of the time with little to no trouble in negotiations. With problems such as South Korean port workers going on strike and the Shanghai ports getting ready to open, this creates bullwhip effects that will produce inefficiencies in the supply chain forecasted to last until at least 2025. This has increased logistics costs by an average of 400-500% since COVID-19 started back in 2020.

These bullwhip effects create difficulties with consistent lead times, thus making safety stock and suppliers within continental proximity of manufacturing sites critical.?However, one supplier had monopolized the market for several of the raw materials, making proximity irrelevant given that their facility is the only place on Earth that will mass produce our materials.

End Result – Presenting in the War Room

I concluded my strategic findings with an hour-long presentation to raw material managers, senior directors and the Chief Procurement Officer. I gave concise insights while answering the executive’s questions in the hour I was given to present. I gave overall recommendations and strategic actions for each Raw Material. After presenting/having the discussion in the war room, I uploaded the strategy power point as well as supporting data and articles to a share point drop box where my findings will be used by the Chief Procurement Officer, the business leader, the Senior Directors of Procurement, Procurement Managers, and employees all over the globe.

Supplier relationship management

During this project, I had the opportunity to meet and talk with several suppliers from Japan, the United Kingdom, Canada, China, and Taiwan. All of our suppliers were helpful – we use our relationships with suppliers to benefit both our organization and the supplier mutually. For example, if one of our suppliers is having logistics or operational issues, we can source from secondary suppliers to avoid production disruption at our plant sites that can't meet the lead time or production limit stated within the contract; we will spot buy off another supplier and avoid legality.

Building mental models, framework, harvesting and analyzing data, and putting together a presentation are significant picture steps for telling a story to corporate executives. Regardless of the product or idea, the process of building strategy will be scalable once the initial stages are set in stone. Building strategy has been a source of growth and skill I will carry with me past this internship.