*Strategic supply optimization is deciding competitive factor of value adding companies*

A contribution by Dr. Andreas Kipp, CEO of KF²Strategy GmbH - 1/27/2014

Strategic supply optimization stands for the establishment and implementation of the best procurement strategy along the entire value chain in a value adding company in many industries. The implementation of the best procurement strategy enables the critical review and optimal deployment of a company’s strategy and brand positioning and is therefore a deciding cornerstone of maximum success.

The development of the best procurement strategy, in terms of strategic supply optimization, requires an analysis of global competition in all steps of the value chain, an evaluation of the company’s competitiveness pertaining to each of the individual steps and establishment of a foundation for successful innovation. Of vital importance are those parts of the value chain having a significant strategic impact on the company success.

Strategic supply optimization targets the following results:

1) The corporate strategy, which defines the value add architecture, the brand and the procurement portfolio (which fulfills optimal criteria) are consistent.

2) Creating a successful, risk-controlled and sustainable portfolio of suppliers, which contribute to maximum value add and profitability in various parts of the value chain.

 3) Establishment of an efficient innovation- and growth motor anchored within the organization, which bundles internal and external knowledge of the supplier portfolio and related resources in order to identify innovative future products and services, incorporate these into the company portfolio and successfully position them in the market. 

Prerequisite for a successful strategic supply optimization is the deep understanding of both internal and external value chains. Furthermore, the best procurement strategy must be “in line” with the corporate strategy. Strategic supply optimization is not a "blueprint-methodology" but rather a combination of thorough knowledge of the best procurement, value design and market forces which act along a company specific value chain. The intensity of these market forces depends on the individual company as well as its resources and capacities.

Parameters such as innovation, quality and return, impact (under consideration of constraints such as sustainability) the procurement strategy in terms of strategic supply optimization. The rough design of the procurement organization and -processes is derived from the best procurement strategy and supply portfolio. The fine tuning of both the procurement organization and -processes results from the structuring, analysis and evaluation of sourcing categories, their complexity and volumes. Typical processes are ‘supplier management’, ‘strategic sourcing’ and ‘operative procurement’.