Strategic direction through purchasing portfolio management. How purchasing practitioners use the kraljic matrix. Kraljic 1983 advised managers to guard their firms against damaging supply interruptions and to deal with continuous technological change and economics growth. The kraljic model can be used to analyze the purchasing portfolio of a company and thus support decisions and actions regarding the purchase of raw materials and. This is a video presentation of the solution that allows to easily create a kraljic matrix and then build a kraljic diagram. May 23, 2018 the kraljic matrix facilitates the management of a companys inventory. Once thats done, your organization can develop supplier relationship management strategies against your map of suppliers.
How purchasing practitioners use the kraljic matrix stockholm. Once you know this, you can select an appropriate purchasing strategy. Gelderman is associate professor of marketing and purchasing management at the open university of the netherlands in the netherlands. Kraljic 1983 suggested that purchasing in many companies is based on routine, transactional activities that afford little strategic consideration to potential economic and political disruptions to materials supplies. A search after the core concepts of purchasing by raf verheyden with the help of professor dr. Figure 1 present the basic concept in kraljics model.
Kharlamov department of management, economics and industrial engineering, university of aveiro, campus of santiago, 3810193. The observed supplier dominance in the strategic quadrant of the kraljic matrix is a notable finding, which indicates that even satisfactory partnerships are. The kraljic matrix for procurement bellwether software. Kraljics purchasing portfolio model aims at developing differentiated purchasing and supplier strategies through classifying commodities on the basis of two dimensions. Kraljics purchasing portfolio model, which was introduced in 1983, still is the dominant approach in the profession. The kraljic matrix inspired many practitioners and researchers to gain a deeper understanding of the possibilities of a portfolio approach for purchasing purposes e. The kraljic matrix helps us develop a purchasing strategy for the products and services our organization consumes. Pdf purchasing strategies in the kraljic matrix a power and. Leverage items standard, substitutable alternate suppliers high volume or cost. This model, however, does not provide in guidelines for strategic moving commodities andor suppliers within the matrix. The kraljic matrix works by mapping the profit impact of a product on one axis, and our vulnerability to the suppliers disappearance on the other. A companys need for a supply strategy depends on two factors. Unpicking the kraljic matrix for procurement blog procurious. The kraljic matrix is an influential strategic tool to guide managers so that they can recognise the weakness of their organisation and formulate strategies for guarding against supplies disruption lysons and farrington, 2006.
Package kraljicmatrix march 6, 2018 type package title a quanti. Kraljics portfolio model, which was developed in 1983, seems to be the dominant approach in the profession. It identifies the two variables of risk and spend as determining the type of commercial relationships that should be. Pronunciation of kraljic with 1 audio pronunciation, 1 meaning, 3 translations, 1 sentence and more for kraljic. Want to learn more about how to use the kraljic matrix in procurement. Though there are some aspects of the kraljic matrix that have been more questioned than others. Gelderman faculty of management sciences mw, open university of the netherlands ounl, p. The kraljic portfolio purchasing model helps purchasers understand where their products are classified in terms of supply risk and profit contribution, and also know whether the balance of power lies with them or with their suppliers. Purchasing strategies in the kraljic matrixa power and. Vlerick sales center article summary series purchasing must. Purchasing strategies in the kraljic matrixa power and dependence perspective. Markets have become more dynamic, and the supply situation can change significantly in short time periods. Application of kraljics purchasing portfolio matrix in. Kraljic 1983 suggested that purchasing in many companies is based on routine.
Use pdf export for high quality prints and svg export for large sharp images or embed your diagrams anywhere with the creately viewer. View kraljic matrix ppts online, safely and virusfree. The models clear strength is that it relatively simple leads us to a useful procurement strategy. Peter kraljics matrix is an analysis tool that seeks to map the importance to an organisation of the item being purchased against the complexity of the market that supplies it.
Purchasing has not always played a strategic role in organizations. Feb 28, 2017 the kraljic matrix is one of the most effective ways to deliver accurate supplier segmentation. One of the primary weaknesses of the kpm is the qualitative nature of the model, which results in a subjective method for weighting and positioning suppliers or commodities in the various quadrants. We used such catchy definitions for exact quadrate of matrix from wellknown classic literature of russian and foreign authors or even from greek mythology pin kraljic matrix and kraljic diagram in excel. Although the kraljic matrix may appear simple to many procurement professionals, it. Kraljic matrix 1 kraljic 1983 suggested that all commodities and all buyer supplier relationships are not to be managed in the same way. Kraljics 1983model seems to be the dominant approach in the profession. Kraljic 1983 was the first to bring portfolio models into the purchasing area. Since its inception, the kraljic portfolio matrix kpm has been widely used as a diagnostic and prescriptive purchasing tool.
Purchasing strategies in the kraljic matrixa power. Pdf the procurement process refining inputs for kraljic matrix. Kharlamov department of management, economics and industrial engineering, university of aveiro, campus of santiago, 3810193 aveiro. Pdf purchasing strategies in the kraljic matrix a power. The kraljic matrix facilitates the management of a companys inventory. In his seminal paper he called attention to the need for companies to attain more effective supply management. Handling measurement issues and strategic directions in kraljics. Based on an in depth case study, derived from a major dtch chemical company, the use of a portfolio techniques has been explored and described. The result is a traditional 2 x 2 matrix the creates quadrants that position a supplier and define a companys strategic approach to that supplier kraljic later made enhancements to the model, including a 3 x 3 version, and there have been many refinements of this by others over the years. Contrary to the growing use of the kraljic matrix, there are problems and unanswered. Each of the four categories of commodities in the kpm requires a different approach to suppliers.
This chapter will give a first introduction to this topic and discusses the content of this book. Pdf positioning of commodities using the kraljic portfolio matrix. The kraljic was first introduced in 1983, peter kraljic created a matrix called kraljic portfolio purchasing model that could be used to analyse the purchasing portfolio of a company. I also enjoy hosting a criticality analysis together with a. The kraljic matrix is named after the man who created it, peter kraljic. Kraljic matrix, also known as purchasing portfolio matrix or supply chain portfolio matrix, is. Kraljic matrix, also known as purchasing portfolio matrix or supply chain portfolio matrix, is a method developed by peter kraljic in it is used to create a. Kraljic portfolio purchasing model, a purchase strategy tool. In supply chain management, the kraljic matrix or kraljic model is a method used to segment the purchases or suppliers of a company by dividing them into four classes, based on the complexity or risk of the supply market such as monopoly situations, barriers to entry, technological innovation and the importance of the purchases or suppliers determined by the impact that they have on the. Purchasing strategies in the kraljic matrix a power and dependence perspective article pdf available in journal of purchasing and supply management 112. Vlerick sales center article summary series purchasing. The kraljic model can be used to analyze the purchasing portfolio of a company and thus support decisions and actions regarding the purchase of raw materials and products.
Power and interdependence in buyer supplier relationships. It essentially provides a portfolio management approach to managing an organizations many suppliers. This model, however, does not provide guidelines for strategic movement of commodities andor suppliers within the matrix. In 1983, peter kraljic created a matrix called kraljic portfolio purchasing model that could be used to analyse the purchasing portfolio of a company. Pdf too often purchasing is seen as just an improved operational. Despite its age, its a popular and useful model used in companies worldwide. Get the practical steps and top tips on applying it. Its purpose is to help purchasers maximize supply security and reduce costs, by making the most of their purchasing power. The kraljic model can be used to analyze the purchasing portfolio of a company and thus support decisions and actions regarding the purchase of. His 2x2 matrix is set out to provide companies with a way to distinguish between. Supply risk level of rarity and financial risk cost items that are the hardest to attain are those that are of a high supply risk and a high financial risk. Ed procs 26th annual arcom conference, 68 september 2010, leeds, uk, association of researchers in construction management, 10291037. Positioning of suppliers by conducting a criticality analysis you can easily position your suppliers and subcontractors in the different quadrants.
This is an evergreen article mainly used by professionals in procurement and supply chain to classify their suppliers and then use this classification to manage the relationship with their suppliers. Mar 23, 2008 this is a video presentation of the solution that allows to easily create a kraljic matrix and then build a kraljic diagram. In 1983 kraljic write that purchasing as it was known then and not procurement was carrying out activities routinely. Being able to adapt to these changes is a critical success factor for procurement. Purchasing has not always played a strategic role in organizations but this has changed over the last decades. The kraljic matrix is one of the most effective ways to deliver accurate supplier segmentation. This matrix helps a company gain an insight into the working methods of the purchasing department and how they spend their time on various products this tool shouldnt be used just for the sake of it, be. Kraljic matrix is divided into 4 quadrants that will show the potential result of the profits that a certain business can have when it is on one axis and see how vulnerable the business will be, with the suppliers disappearance from the other side of the axis. Hence, an increased understanding will be obtained in the differentiation of purchasing strategies of different products. How purchasing practitioners use the kraljic matrix a relative comparative case study with four big swedish industrial manufacturing companies many manufacturing companies spend more than half o was the kraljic 1983 comprehensive portfolio appr that the supplier side is disregarded.
Although the kraljic matrix may appear simple to many procurement professionals, it is often. The procurement process refining inputs for kraljic matrix yields objective purchasing portfolios and strategies by stephan m. It identifies the two variables of risk and spend as determining the type of commercial relationships that should be formed for supply agreements. The purpose is to investigate how the kraljic model 1983 can be applied in an industrialized housing factory. The matrix relies on two factors when considering items needed. The portfolio model concept was originally developed by markowitz 1952, who used it as an instrument for managing equity investments. Purchasing strategies in the kraljic matrixa power and dependence perspective marjolein c. Bildsten, l, rehme, j and brege, s 2010 applying the kraljic model to the construction sector. Creately diagrams can be exported and added to word, ppt powerpoint, excel, visio or any other document. Howard price, director praxis andrew lancaster, director vector europe practitioners shortened version, excluding confidential names and business case december 2003. This matrix helps a company gain an insight into the working methods of the purchasing department and how they spend their time on various products. Vlerick sales center article summary series purchasing must become supply selling.
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