S.R. Gangurde
Amol A. Chavan
Abstract
Firms frequently procure a large quantity and variety of products to execute their operational responsibilities and satisfy various plans and policies of the organization. While these procurement activities entail significant time and monetary resources of the firm, they also carry a fair degree of risk for the firm. The purchasing strategies, therefore, tend to have a large influence on the overall performance of the organization. There is necessity that the firms employ a professional purchasing approach. Kraljic Portfolio Matrix (KPM) proposes a more objective methodology to classify and position commodities in a continuous scale around the two dimensions of 'supply risk' and 'profit impact', the two dimensions which mainly influence the choice of a firm's purchasing strategy. The KPM helps purchasers to understand where their products are classified and also know whether the balance of power lies with them or with their suppliers. KPM approach appears useful, both for developing effective purchasing strategies as well as for managing a global supply base. In this paper, An application of the proposed approach is attempted on commodities procured by the boiler industry where KPM is used to classify items based on above criteria and then determine the overall supply strategies for each group.
Keywords- Benchmarking, Kraljic portfolio model.