Corporate & Procurement Strategies

What is it?

Strategy is the direction and scope of an organisation over the long-term which achieves advantage in a changing environment through its configuration of resources and competences, with the aim of fulfilling stakeholder expectations.[1]

Strategies operate at a number of different levels.

• Corporate strategies apply to the whole organisation. They focus on the broad, general direction of the organisation and how value will be added over the long-term (3 to 5 years).

• Business strategies apply to particular divisions or operating units. They focus on the tasks and objectives required to pursue the chosen corporate strategies over the medium term (2 to 3 years).

• Functional strategies apply to functions and departments, such as procurement. They focus on the specific detail of tasks, targets, resources and actions needed to deliver the corporate and business strategies in the short term (1 to 2 years).

It is important for procurement strategy to be aligned with corporate strategy and for procurement practitioners to understand what this entails so that they can operate effectively and add value to the organisation.

Examples of how procurement can support corporate objectives are shown below:

What does it look like?

How does it work in practice?

In South Africa the National Health Insurance (NHI) Bill of 2019 provides a framework for the strategic purchasing of health care services on behalf of users. The forward strategy within the NHI Bill includes the establishment of the Office of Health Products Procurement covering the three categories of pharmaceuticals, medical supplies and medical equipment, thereby integrating and aligning Procurement to the overall direction of the Department of Health (DoH).

A recent study found a number of good practices within the pharmaceuticals category. Although there is no evidence of a formal documented procurement vision, strategy, strategic objectives, or multi-year plan, there is alignment between procurement activity and the DoH’s overall strategic objectives of medicine availability, affordability and health outcomes, noting that such priorities tend to be relatively stable. One such mechanism for this is the recent improvements in coordination between supply and demand forecasting processes, including in-contract demand planning.

Processes are in place to support the DoH's overall strategic objectives, e.g. price benchmarking, specifications based on therapeutic need (to widen supply market competition), and consolidation of demand, thereby enabling value for money. There is an annual Procurement Plan, albeit simply focused on the planned tenders for the year. Team members are procedurally aligned with the department’s priorities, with individual objectives integrated into annual appraisals and 6-monthly performance reviews.

There is less focus on the medical supplies category. Consequently, there is no evidence of any linkage between the somewhat limited procurement activity and the overall strategy of the DoH. There is no procurement strategy, plan or objectives.

For medical equipment, whilst there is no formal documented procurement strategy, plan or objectives, there is some evidence of emerging alignment between the demand and supply sides, through the National Treasury and Health Technology working to develop comprehensive sourcing strategies for some categories (including electro-medical, mental health, dental, physio and radiology) via for example:

• specifications written to avoid brand bias;
• greater sophistication of specifications reflecting different requirements in different facilities;
• standardisation of specifications to enable consolidation of demand.

[1] Exploring corporate strategy: text and cases; Johnson, Gerry; Scholes, Kevan; Whittington, Richard; Prentice-Hall, 8^th edition; 2008