Strategic Purchasing

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ABERDEEN BUSINESS SCHOOL

Coursework Submission Form

Name| Vigneshwaran Palanisamy|
Email:| 1118562@rgu.ac.uk|
Course:| MSc Purchasing & Supply Chain Management|
Module:| BSM 520 STRATEGIC PURCHASING|
Date:| 10th April 2012|
For the attention of:| Carol Air|

TABLE OF CONTENTS

S.NO| TOPICS| PAGE NUMBER|
1| EXECUTIVE SUMMARY| |
2| INTRODUCTION| |
3| OBJECTIVE| |
4| THE KRALJIC PORTFOLIO MODEL| |
5| CASE STUDY5.1 THE PORTFOLIO APPROACH5.2 BOTTLE NECK5.3 NON – CRITICAL5.4 LEVERAGE 5.5 STRATEGIC| | 6| CONCLUSION| |
7| RECOMMENDATIONS| |
8 | REFRENCE| |

1.0 EXECUTIVE SUMMARY

Sustainable business growth and practices are taking a forward leap in to the globe. Almost every business now is planning to have a value chain through out their business. Strategic Purchasing is the key element to a sustainable growth of the business along the competitive edge. This study shows the importance of the Kraljic portfolio model that is to be put in to the actual usage, which would yield benefits of purchasing sophistication in terms of positioning and professionalism. Results showed that both positioning and professionalism are positively related to the greater usage of the model. Based on the analysis of a Dutch chemical company, the immense use of the portfolio model has been described and explored in strategic purchasing. The results have proved that when the model is tailored and elaborated it brings about an effective guidance in purchasing and supplier strategies. The case study also lists out the supplier strategies that are feasible. Thus it supports the fact by using the kraljic model that purchasing function does play a vital role and enable organizations to gain competitive advantage

2.0 INTRODUCTION
The Initial objective of strategic purchasing to procure materials & equipment’s, from the right origin, with the right quantity and of the right quality, through right time and cost (peter 1993). Strategic purchasing does play a vital role in an organization. To have a successful business venture purchasing has to be the core element responsible for a product’s quality, acceptability, price and reliability. Procurement system solely depends on the choice of suppliers, to ensure the delivery under any circumstances (John, Marton 2006). Purchasing is classified into two categories – 1) Purchasing of direct materials, which become company’s value proposition like raw materials, semi manufactured goods. 2) Purchasing of indirect materials, which do not fall under company’s value proposition like CAPEX (capital expenditure), non-production materials, MRO Supplies - maintenance, repair and operation (Van Weele 2010).

3.0 OBJECTIVE
The primary objective of this research proves that purchasing functions does Play a vital and important role in enhancing organizations growth in business through competitive advantage. The result of the research is obtained through using the kraljic’s portfolio model, which seems to be dominant in the purchasing functions. However this model has its own criticisms, the true value and the use of portfolio techniques in the case study of the Dutch company describes it. The case study sorts out the tools and strategies, which are essentials for an effective purchasing function through developing efficient purchasing and suppliers strategies.

4.0 THE KRALJIC PURCHASING PORTFOLIO MODEL
Kraljic(1983) was the first person to introduce a model which determined a differentiated set of purchasing strategies. The main theme behind the model was to reduce the risk in supply and to enable a maximum usage of the purchasing function (kraljic 1983). The model critically analysis the dimensions through risk in accounting on one side and usage of purchasing functions on the other side of the coin. The kraljic model elaborates its theory through usage of 2*2 matrixes with dimensions, profit impact as low and...
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