Title: Assessing suppliers for strategic integration: a portfolio approach

Authors: Alessandro Brun, Margherita Pero

Addresses: Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Piazza Leonardo da Vinci, 32 – 20133, Milano, Italy. ' Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Piazza Leonardo da Vinci, 32 – 20133, Milano, Italy

Abstract: Since Kraljic|s (1983) seminal work, purchasing departments in the most successful organisations adopted portfolio approaches to supplier management. However these models fail to consider final market demand and price volatility, thus leading buyers to establish with suppliers long-term relationships also when the investments are not properly rewarded. Moreover, portfolio approaches provides high level guidelines seldom integrated with operative tools such as vendor rating systems. This paper presents a new portfolio model that, taking into account final market features, indicates both the level of right buyer-supplier integration and the evaluation parameters to assess when choosing the supplier for that relationship. Expert interviews and a case study have been performed to test the proposed model. The results indicate that, for high supply market risk, strategic product must be purchased with different strategies depending on the difficulty of the downstream market. Moreover, different parameters should be assessed depending on the strategy adopted.

Keywords: purchasing processes; supplier performance; performance evaluation; partnering; partners; strategic integration; portfolio approaches; Peter Kraljic; supplier management; final market demand; price volatility; buyers; long-term relationships; investments; high level guidelines; operative tools; vendor ratings; final markets; evaluation parameters; high supply; market risks; strategic products; downstream markets; Italy; business excellence.

DOI: 10.1504/IJBEX.2011.040109

International Journal of Business Excellence, 2011 Vol.4 No.3, pp.346 - 370

Published online: 27 Sep 2014 *

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