Kraljic’s Portfolio Matrix
The Amended BBBEE codes have made the linkage between Enterprise Development and Preferential Procurement clear with the introduction of Supplier Development. In this article we will consider the various targeted procurement interventions that could be used to assist in the growth or entry of QSE/EME’s in the supply chain. For the purposes of this article we will therefore use targeted procurement as referring to the procurement of a Black or Black Woman Owned QSE/EME.
In analysing the different Targeted Procurement strategies we will be making use Kraljic’s adapted Portfolio Purchasing Model which segments the supplier base into four areas.
The tactical arena is normally the purchases that is not critical to the company and will not lead to the company incurring major losses. This could relate to purchases that are once-off or purchases that are recurring in nature, but are relatively low in spend. This does not mean that the purchases are not expensive, but rather that it makes out quite a low portion of the spend volume. This area would see the following targeted interventions:
Targeted procurement through a new service or goods request
This would entail the targeted procurement of a service that was not previously procured by the company.
Targeted procurement by replacing big with small
A service that was previously completed by a generic company will in future be completed by a QSE/EME.
Unbundling of large contracts in order to provide access to SMME’s
This strategy shifts the spend strategy from the leveraged sourcing space into the tactical space by providing access to smaller companies by lowering the volume of supply.
Reducing non-value add barriers to entry
During the existence of the buying company many companies have been able to justify themselves as Original Equipment Manufacturers or Sole Suppliers of certain types of equipment. In some cases this is true, but in other cases over the years companies have come to use legacy equipment which they really do not require any more. By addressing this waste in the company you might be able to lower the barriers of entry for smaller companies in order to access your supply chain.
Targeted procurement by focusing on an Entrepreneur in a non-related industry sector
This intervention focuses on buying goods or services from an Entrepreneur that has shown to be successful in other industries. The risk in this intervention is higher than in the other interventions, but this intervention could also lead to greater innovation and value add for your organisation. This might be an intervention to consider if there is low or no market supply.
Read our next blog in which we address the area of leveraged sourcing….