The determination of the optimal procurement strategy
regularly starts from a consideration of the position that one occupies
on the impact/power matrix (see figure).
Whereas the other fields are the common tools of the trade of procurement, the area of strategic
often represents a special challenge. In this quadrant,
the impact of a loss of supply upon the customer profitability is high, due to the goods/services e.g. being
essential for the creation/delivery
of the customer's product. As however all power lies with the vendor, typically because the vendor holds a
monopoly(-like) position in the supply market, this situation
represents a particular dilemma for the procurer. With the category being essential for the company (high
profitability impact), it is vital to obtain
good pricing and include contract clauses which lower supply risk despite the balance of power lying with
the vendor. At the same time, as the balance of power lies with the vendor.
This dilemma may be addressed by means such as:
- A reinforcement of the social component by e.g. developing the relationship with the supplier
through information exchange and/or mutual support.
- Increasing one's attractiveness as a customer and becoming a preferred customer. This approach requires a good understanding and consideration of the vendor's
interests and priorities.