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SCM B371 Logistics
Procurement Portfolio Approach
• Situation analysis
• Kraljic’s Portfolio Matrix2
– Used to classify corporate purchases in terms
of their financial importance and supply
risk/complexity
– Goal is to minimize supply vulnerability and
getting the most out of the firm’s purchasing
power
Global Procurement (Sourcing)
• Refers to buying components and inputs anywhere in the world
• Driven by:
– Factor-input strategy (organization is seeking low-cost or high-quality
sources of supply)
– Market access strategy (organization is sourcing in markets where it plans
to do significant business)
SCM B371F
Global Procurement (Sourcing)
• Challenges in establishing a successful global sourcing strategy include
understanding hidden costs as supply bases are expanded
• Examples of hidden costs:
– Increased costs of dealing with suppliers outside the domestic market
– Duty and tariff changes that occur over supply agreement life
– Increased inventory-related costs associated with global supply chains
– Rising levels of logistics cost volatility (e.g., ocean freight rates)
• Total cost of ownership
SCM B371F
Sustainable Procurement
• Refers to the integration of social and environmental considerations into all
stages of the purchasing process
• Goal is to minimize the impact of procurement activities on human health and
the environment