Question

Beta produces plastic toys. The Procurement Manager decides to carry out an analysis to identify the best procurement strategy to adopt and to understand what the correct number of suppliers to use should be. Relevant data in this regard is provided in Table 1. place all the above materials in the quadrants of the kraljic matrix.for each material,describe the correct procurement strategy that should be adopted the explain how many suppliers the company should have and why.

Answer 1

The Kraljic Matrix helps Beta determine the best procurement strategy by categorizing materials into four quadrants and advising on the appropriate number of suppliers based on production cost, market structure, supply, and demand. Strategic items require a few key suppliers for a reliable supply, while leverage items can warrant multiple suppliers to capitalize on competition.

Step-by-step explanation:

The Kraljic Matrix is a strategic tool used to guide procurement professionals in determining the most appropriate procurement strategy based on the analysis of risk and the importance of the various goods and services being procured. It categorizes procurement items into four quadrants - non-critical, leverage, bottleneck, and strategic - enabling companies to identify the right number of suppliers to ensure supply chain stability as well as cost efficiency. The matrix takes into account multiple factors such as the cost of production, market structure, and supply and demand dynamics.

For non-critical items, the procurement strategy aims for efficiency and often includes standardization and bulk purchasing, potentially from a single supplier or a small number of suppliers. Leverage items are high in value but low in supply risk, so the strategy involves securing favorable terms through volume discounts and potentially maintaining a larger group of suppliers to foster competition. With bottleneck items, which have complex specifications and few alternative suppliers, the strategy focuses on securing supply and forming partnerships with suppliers. Finally, for strategic items that are high in both value and supply risk, adopting a long-term partnership approach with a few key suppliers to ensure a reliable supply is paramount.

Decisions on how many suppliers to use for each category should be made on a case-to-case basis, considering factors like price fluctuation, supply reliability, and the potential impact on production if supplies are delayed or disrupted. Using multiple suppliers can help mitigate risks and ensure continuity of supply, while in some cases, using a single supplier might be more beneficial for cost-saving through bulk purchasing.