Kraljic's Purchasing Model

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Introduction Purchasing function has attracted proper attention based on its role and impact within companies today. It can be owed to the fact that available purchasing strategies often contribute to developing competitive advantages. Hence, it is crucial within organisations to align their purchasing strategies with their business strategies. One of the ideas that affect purchasing policy is the supply positioning matrix model, for instance, the Kraljic model, that can be used to explain how materials and products are categorised. This paper will, therefore, assess the role of strategy purchasing while outlining the process that can be used in mitigating risks as well as the evaluation of the right supplier in order to ensure efficient purchasing…show more content…
In determining strategy, purchasing function of a company can employ this model to increase its purchasing power while lowering the possible risks; hence, using a strategy gives it the competitive advantage. The Kraljic purchasing model helps in amplifying the two dimensions to be considered in developing a strategy, and these are the profit impact and the supply risks (Gelderman & Weele, 2003). Understanding this model helps in distinguishing the four product categories: strategic ideas that contain a high-profit outcome and high supply risk; bottleneck issues have little profit outcome but high supply risk; then followed by leverage items have a high-profit outcome with low supply risk; finally, non-critical items that have both low-profit outcome and low supply risk. Integrating strategies within purchasing strategies by applying such a model mitigate the risks firms often face and, hence, improves the chances of gaining the completion advantage by meeting the shareholders ' expectations. It is crucial to remember that purchasing strategies have a direct impact on power (Pfeffer & Salancik, 1978); this, in turn, affects the purchasing power of the…show more content…
One of the key risks threatening the procurement function today is technological development. Most of the modern procurements take place online and this affects companies that are still lagging behind and mars transparency of the procurement process in certain circumstances (Schapper et al., 2006). Weak strategies can leave procurement functions vulnerable as they fall to suppliers who are not transparent in their transactions. The best way to overcome this is meeting the suppliers physically or order samples before purchasing when possible. The second risk is the lack of an adequate regulatory framework. A complicated policy threatens the efficiency of procurement as it leads to the lack of trust between supplier and the buyer (Bolton, 2006); hence, hinders the success of the negotiation. The appropriate action to take is developing a framework that does not stress the understanding of both parties and ensures
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