Developing the application model for the Kraljic's purchasing portfolio

Abstract

Portfolio models are popular in purchasing and supply management to optimise strategies for supplier relationship management. Portfolio models, such as Kraljic's purchasing portfolio, are based on subjective judgements and are qualitative in their nature. Portfolio models have been criticised because they lack guidelines on how the models could be applied in practice. The key to the application is the definition of appropriate key attributes that can be used for measuring and defining the dimensions. In this study, the factors which influence the supply risk and profit impact are studied by deriving the appropriate attributes from the empirical data of a multinational electrical manufacturer. This study contributes by identifying the key attributes for the dimensions of profit impact and supply risk and by scaling these with numerical values for the purposes of Kraljic's matrix. As a result, this study provides a practical model, explaining how companies can apply Kraljic's matrix.