Several different models assist the buyers in making their purchasing decisions and maintaining supplier relationships. One of such models was created by Peter Kraljic in 1983 (Gelderman & Van Weele 2005). Since the day it published, the model attracted the attention of the purchasing theorists and practitioners (Glöckner, Pieters, & Rooij 2005). This paper presents the discussion of Kraljic’s model as a tool helping to form purchasing strategies and its advantages and disadvantages in terms of supply risk and profit impact.
Verheyden (2003) notes that the research of strategic buyers’ choices found that Kraljic’s model is the most popular portfolio tool among the professionals in this career field. The feature of the model that contributed to its popularity was its simple outlay and accessibility for the professionals as well as the individuals whose occupations are not related to purchasing (Glöckner, Pieters, & Rooij 2005).
For the ease of understanding of the readers, Kraljic has divided his model into four primary steps such as classification, market analysis, strategic positioning, and action plan (Krajic 1983). The benefit is that the model may be applied to various context and is straightforward enough to enable easy mapping of future actions. However, the easy outlay has been the cause of criticism as many professionals state that purchasing strategies are based on extremely complex and multidimensional decisions; and that is why they cannot be based on tools as simple as Kraljic’s model (Gelderman & Van Weele 2005).
The model distinguishes between two variables – spend and risk; they identify the kinds of commercial relations a buyer forms with the supplier. Further, using the type the relationship determined at the previous stage, one may characterise their purchasing activity as strategic, leverage, routine, or bottleneck (Krajic 1983). These characteristics are designed to help the buyer make their decision as to the purchase strategy most suitable for the activity. The advantage of this structure of the matrix is that it highlights the risks related to the issues of supply and taking into consideration the number of available suppliers and their quality.
For instance, if the activity falls into the strategic category, the purchaser would react accordingly and work to form long-term trusting relations with the supplier relying on the items in the waste and cost areas. Besides, evaluating the supplier, a purchaser may use the supplier strength determinants in the portfolio (Krajic 1983). Also, the strength of the supply market may be determined using the matrix for the buyer to see the profit opportunities.
Another advantage of the model is that it prioritises the quality of the purchased product over the traits of the supplier. Based on the information about the goods supplied by various sources, the buyer would be able to define the need for negotiations and the spheres that are to be negotiated with the supplier.
As for the disadvantages of the model, its ease of use is negatively compensated by its short-term effectiveness as the model evaluates a situation at a given short period; that way, as soon as one aspect changes, the matrix would need to be applied once again to see the new results and strategies available. Finally, the matrix does not take into consideration the possible tension between the buyer and the supplied based on the relationship of power. The model is biased and orientated only at the side of the purchaser while the potential reactions of the supplied are omitted.
To conclude, Kraljic’s model presents an easy to use matrix enabling the buyers to evaluate the suppliers and form profitable purchasing strategies. The simple outlay and applicability to various context are the obvious advantages of the model. Its disadvantages are the omission of the supplier’s potential reactions and the short efficiency term of one evaluation.
References
Gelderman, C J, & Van Weele, A J, 2005, ‘Purchasing Portfolio Models: A Critique and Update’, The Journal of Supply Chain Management. Web.
Glöckner, H, Pieters, R, & Rooij, W 2005, ‘Importance of the Kraljic Matrix as a Strategic Tool for Modern Purchasing’, LogForum, vol. 1, no. 3, pp. 1-11. Web.
Kraljic, P 1983, ‘Purchasing must become supply management’, Harvard Business Review. Web.
Verheyden, R 2003, What is Purchasing?. Web.