Strategic Direction through Purchasing Portfolio Management: A Case Study

• Date: 01 March 2002
• Published date: 01 March 2002
• DOI: http://doi.org/10.1111/j.1745-493X.2002.tb00127.x
• Author: Cees J Gelderman,Arjan J. Weele

Contrary to the growing number of academic publi-

cations on purchasing portfolio models in literature,

little is known about their actual use. Kraljic’s port-

folio model, which was developed in 1983, seems

to be the dominant approach in the profession.

This model, however, does not provide guidelines

for strategic movement of commodities and/or sup-

pliers within the matrix. Based on an in-depth case

study, derived from a major Dutch chemical com-

pany, the use of portfolio techniques

in purchasing has been explored

and described. The results indicate

that Kraljic’s portfolio approach, when elaborated

and tailored, indeed allows for sufficient guidance

for developing effective purchasing and supplier

strategies. The case study points out what supplier

strategies are feasible and what conditions should

be met in order to make them happen.

INTRODUCTION

Obviously, not all buyer-supplier relationships are to be

managed in the same way. Research findings indicate that

successful supply chain management requires the effec-

tive and efficient management of a portfolio of relation-

ships (Bensaou 1999). Kraljic (1983) introduced the first,

comprehensive portfolio approach for the use in pur-

chasing and supply management. By categorizing prod-

ucts in a 2x2 matrix, sensible guidelines were given for

managing supplier relationships. The Kraljic portfolio

approach is generally considered as an important break-

through in the development of theory in the field of

purchasing and supply management (Syson 1992). In

general, purchasing portfolio models aim at developing

and implementing differentiated purchasing strategies.

Recently, some new specific applications have been intro-

duced, notably supplier involvement in product develop-

ment (Wynstra 1998), supplier selection (de Boer 1998),

supplier development (Handfield et al. 2000), Web-based

procurement of MRO items (Croom 2000), specification

processes (Nellore and Söderquist 2000), engineering-

purchasing-supplier interaction (Nellore and Taylor 2000),

facilitation of an internal process of change (Axelsson et

al. 2000), and interorganizational competence develop-

ment situations (Møller and Momme 2000).

Other authors have used Kraljic’s basic ideas for the

development of similar models, for instance Elliott-

Shircore and Steele (1985), Syson (1992), van Weele

(1994), Lilliecreutz and Ydreskog (1999), Bensaou

(1999), Gelderman and van Weele (2000), Gelderman

(2000), and to a certain extent Olsen and Ellram

(1997a). Still, Kraljic’s fundamental ideas and concepts

dominate the discipline. However, there are some prob-

lems and unanswered questions.

The purpose of this article is to provide new perspec-

tives on Kraljic’s model, reporting on some important

advancements in the use of a portfolio approach in pur-

chasing and supply management. This article addresses

a major problem area with respect to Kraljic’s approach:

the nature of the strategic recommendations. The results

are based on a case study research, conducted at a large

industrial company that is structured around a number

of fairly autonomous business groups.

30 The Journal of Supply Chain Management | Spring 2002

Strategic Direction through

Purchasing Portfolio Management:

A Case Study

Cees J. Gelderman

is assistant professor of marketing and purchasing management at

the Open University of the Netherlands.

Arjan J. van Weele

is the NEVI Chair in Purchasing and Supply Management both at

Eindhoven University of Technology, Faculty of Technology Management

and Nyenrode University, Center for Supply Chain Management, the

Netherlands.

AUTHORS

SUMMARY

The Journal of Supply Chain

Management: A Global

Review of Purchasing

and Supply Copyright

© May 2002, by the Institute

for Supply Management, Inc.™

Module 4

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XAM