Resource Origin: Supply Management
“A diagnostic of a company’s spend must first be undertaken.
Divide the total corporate spend into categories that relate to the supplier markets, and then further divide spend categories by business units or locations to identify each supplier.
This initial diagnostic is required to be only around 80 per cent accurate to have relevance and to offer valuable insight.
If and when sourcing teams need to refine spend data for each category, the supplier may be a more accurate source. This is discussed further below.
Diagnostics can provide a spend map by category. These spend categories should be classified according to competitiveness in the supplier marketplace compared with how important they are to the organisation. This results in a spend category matrix that will help direct the team towards a potential sourcing strategy for each category.
The Kraljic portfolio purchasing model plots categories as strategic (low supply market competitiveness, high business impact); leverage (high supply market competitiveness, high business impact); bottleneck (low supply market competitiveness, low business impact); and routine (high supply market competitiveness, low business impact). (See matrix below.)
Once diagnostics are complete, the business must decide which categories to address immediately and which to delay until internal or external conditions are better. For those categories that need immediate attention, the seven-step process begins…”
Contributors: Open SourceCategories: Industry Articles, SIG U Resource
SRC Type: Sourcing, Strategy