4. Supply Management

Supply Management. Once companies realized that purchasing and procurement are important topics for the success of the business, they started thinking of ways to make this whole management of suppliers much better and much more efficient. So supply management refers to a more strategic view of relationships with suppliers. And the idea behind it is that we are targeting and segmenting different categories of suppliers. And those different categories will receive different levels of attention from management. And the way we structure those relationships will be very differently depending on the category that a supplier goes into. Here is how you would put together a Kraljic matrix. First, you’d look at all your goods and services, and you classify them in terms of profit impact and supply risk. Then, you’d look at the supply market and you analyze it. Third, you then determine your strategic positioning within that broader framework of the supply market and the good and services you buy. And fourth, you develop action plans and strategies to best take advantage of your position relative to your suppliers. The Kraljic Matrix is built upon two different aspects. One is profit impact, the other one is supply risk. So as we put together the matrix visually, we have profit impact on the vertical and supply risk on the horizontal. So then, we have high and low categories. In the high profit impact and high supply risk category, we have our strategic suppliers. In the low profit impact, high supply risk category, we have our bottleneck suppliers. In the high profit impact, low supply risk category, we have our leverage supplier. And then finally, in the categories where both profit impact and supply risks are low, noncritical. In the strategic supplier category, where we have a high profit impact and a high supply risk impact, we are striving to focus on implementing great relationships with these suppliers. We truly want partnerships with them. So our goals are not going to be just to drive down cost. But we’re truly seeking to create win, win situations in both our benefit and the benefit of our suppliers.
We are also trying to strive for additional innovation. Suppliers may have innovation capabilities which they can leverage with us. And we’re going to use them to both benefit and drive additional sales by coming up with brand new products. We are going to try to mitigate risk by implementing tighter integration, almost working as one company. And finally, the result of this is only very few suppliers are going to fit into that category. But they’re very important to our business. We are very important to their business. So, all the resources that are required for this management are going to be able to be put up. Then, we have bottleneck suppliers. So those suppliers hold a high risk for us, but they don’t have a very high impact on our profitability. The number one goal with them is to manage that risk and the way you manage that risk is to have multiple sources. You want to have diversity of supply because if one supplier may fail, you have other ones to step in at a moment’s notice.
You also want very tight control on service level. You want to know as much as possible about what’s going on with that supplier so you can manage that risk. Because you cannot afford to risk a supply disruption. Then, there are leverage supplier.
So, they have a high profit impact but low risk. Your goal will be to get as much cost out of buying products with these suppliers as possible. You don’t worry about risk because that’s not much of a concern. You focus in on obtaining the best price, best quality and best service. And you do that through the hardest negotiation that you can. You may also be able to offer a supplier higher volume in exchange for better prices. And finally, there are noncritical suppliers. Those are very small suppliers, we don’t buy a lot from them and they don’t really affect our business. So your overall goal with those suppliers has to be that you want to simplify the process as much as possible. You don’t want to spend any time of money or resources on managing those suppliers. So you want to automate as much as possible. You want to streamline and you want to simplify. Because that complexity is going to really be able to hinder doing well in the other three categories that are much more important. So there are your four categories of suppliers within the Kraljic Matrix. And each one receives different attention and a very different buying process. So overall, the Kraljic Matrix is a customized and systematic approach to managing relationships with different groups of suppliers. And we’re going to use this targeted approach to focus our resources where they really have an impact and we have different strategies depending on our needs.

Jim Rohn Sứ mệnh khởi nghiệp