This document discusses supply market analysis and two frameworks - Kraljic's Supply Positioning Model and the Supplier Preferencing Model. Kraljic's model analyzes supply categories based on profit impact and supply risk to determine appropriate buyer strategies. The Supplier Preferencing Model analyzes suppliers based on the value of the buyer's account and the attractiveness of that account. These models help buyers analyze their supply base and determine appropriate relationships with different suppliers.

1. Supply Market Analysis
- Saravanan

2. Introduction
• Purchasing – Shift from transactional to strategic
activity
• Strategic models,frameworks,methodology required
• Key Questions facing Buyers
• Which spend categories should we focus on?
• Are we going to attempt to cultivate similar
relationships across the whole supply base?
• If not, how and why might they differ across the
supply base?
• How do suppliers view the buyers?

3. Kraljic’s Framework for Sourcing
(Supply Positioning Model)
• The framework is based on two dimensions
Profit impact, Business Criticality/Expenditure level
– Profit impact is high when the item adds significant value to the
organization's output.
– This could be because it makes up a high proportion of the output (for
example, raw fruit for a fruit juice maker) or because it has a high impact on
quality (for example, the cloth used by a high-end clothing manufacturer)
Supply risk
– Supply risk is high when the item is a scarce raw material, when its
availability could be affected by government instability or natural
disasters, when delivery logistics are difficult and could easily be
disrupted, or when there are few suppliers.
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4. Kraljic’s Purchasing matrix
(Supply Positioning Model)
High Bottleneck Items Strategic Items
• Ensure supply • Form partnerships
Supply risk
Non Critical Items Leverage or Bulk
• Outsource and Purchase Items
automate • Exploit purchasing power
and minimize cost
Low
Low High
Profit Impact/Business
Criticality/Expenditure level
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5. Examples
• Examples vary across industries, market.
• Uniforms
• A company with 20 employees and hundreds of possible suppliers of
uniform is a non critical category.
• In the same market, a company with 10,000 employees it’s a leverage
category.
• For a retail company selling special branded uniforms ,made by a supplier
with patented technology – strategic category.
• For a nuclear plant, special uniform providers are scarce and may show no
interest in providing better service/product – Bottleneck item.

6. Buyer Strategies
Leverage Items Non Critical Strategic Items Bottleneck
Items Items
Primary Focus Cost reduction Using Developing Ensuring
through bulk standardized long-term continuous
purchase, products supply supply, storing
negotiations relationships, excess stock
and whenever
considering possible
making the
item in-house
rather than
buying it
Secondary Change Optimizing Analysing and VMI
Focus suppliers order volume, managing risks
inventory level regularly,
planning for
contingencies

7. Takeaways from Kraljic’s Model For
Beroe
• Will help to analyze where a particular spend
category/product figures in the client’s scheme of things.
• Helps to align our recommendations/suggestions inline
with client’s perspective of spend categories.

8. Supplier Preferencing Model
• Supplier Preferencing is based on two dimensions
Revenue/Value of Account
• the percentage of a supplier’s business that the buyer currently represents
• the percentage of a supplier’s business that the buyer could represent
Attractiveness of Account
• the profitability of selling to the customer
• the reputation of the buyer
• the ease of managing the buyer’s accounts
• potential for buyer’s use of good or service to grow
• the potential to use the buyer as a marketing platform for the supplier
• Business Fit
• Payment on time
• Consistency
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9. Supplier Preferencing Model
High Development Core
• High profile customer who could • High level Value added
Attractiveness of
offer good future contracts. services
Account
•Willing to supply in short term
•Keen to meet buyer
request
Nuisance Exploitable
• Little Interest shown• Low profitability, location
•Reduction of transaction inconvenience
costs •Buyer may choose some
Low
other supplier
Low High
Revenue/ Value of
Account
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10. Takeaways from Supplier Preferencing
Model For Beroe
• What do the (key) suppliers think of our client?
• Will help to get an idea about the interest levels
of the suppliers in working with our client.
• Can target/focus/recommend those suppliers
who have sufficiently keen interest in working
with the client.

11. Conclusion
• Qualitative factors for the models must be taken
based on experience,judgement,brainstorming.
• View these models holistically. They are a starting
point for further analysis and not an end in itself.
• They are more important for the new questions they
throw up rather than for the solution they provide.
Thank You