Sourcing Strategies That Are Appropriate to Each of the Four Quadrants of the Kraljic Matrix

(A): Sourcing strategies that are appropriate to each of the four quadrants of the Kraljic matrix

Procurement of split and services constitute a great part of disbursal of many organizations. This has led to studies on how improvements in purchasing spate contri unlesse to an organizations competitive advantage. Kraljic (1983) introduced the portfolio approach for purchasing and supply management. The idea is to minimize supply risk and make the most of buying force play. The Kraljic framework is based on two dimensions: profit electrical shock and supply risk (low and high) for classifying materials purchased by an organization. This results in a quadrant that distinguishes mingled with four product categories: bottleneck, non critical, leverage and strategic items, percolate Fig 1. Each of the four categories requires a distinctive sourcing strategy. (Gelderman and wagon train Weele 2002)

[pic]Figure 1 Kraljic model Product and service positioning matrix

line: Modified from Krajic (1983).

Bottleneck items are products that good deal only be acquired from unmatchable supplier or items whose delivery are punic but have a low impact on the financial results. These are items with high supply risk but low profit impact.



Suppliers have a dominant power position for these products and there is moderate level of interdependency between the buyer and seller (Caniels and Gelderman 2005). The objective of the purchasing strategy for these types of products is to take continuity of supply. Purchasing strategy for these products can be espousal of the dependence relationship while reducing the negative consequences. This can be achieved by volume insurance contract, Vendor Managed stemma (VMI) or security of inventories by keeping extra stocks. Wal-Mart is one of the successful pioneers of the VMI strategy. The Chemical contracts by Shell for offshore chemicals apply in their various processing facilities make use of the VMI. option strategy is to reduce dependency and risk thus moving...If you neediness to get a full essay, order it on our website: Orderessay



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