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Decision making in purchasing

Kraljic versus Monczka Drs. Brigitte Faber-de Lange. Decision making in purchasing. Changing role of purchasing. Shorter product life cycle Increase change in technology Improved infrastructure and falling distribution costs Improved data communication Lowering of trading barriers

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Decision making in purchasing

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  1. Kraljic versus Monczka Drs. Brigitte Faber-de Lange Decision making in purchasing

  2. Changing role of purchasing • Shorter product life cycle • Increase change in technology • Improved infrastructure and falling distribution costs • Improved data communication • Lowering of trading barriers • EU (European Union) • WTO (World Trade Organisation) Lindi 2007

  3. Kraljic’s portfolio MSU model of Monczka Two models compaired Lindi 2007

  4. Kraljic portfolio • Explanation of the model • How to use the model to find the appropriate purchasing strategy Lindi 2007

  5. 1. Kraljic-portfolio Lindi 2007

  6. 4 9 8 6 5 7 3 2 1 2. Appropriate strategy Search for other options Accept present situation (dependency), reduce risks Strategic Bottleneck Build on existing relationship Accept bad relationship Search for new supplier Supply risk Low High Routine Leverage Volume of purchasing Low High Reduce administration Make full use of own market position Bundle purchases Develop supplier into a full partner Lindi 2007

  7. MSU model of Monczka • MSU stands for Michigan State University • Robert Monczka constructed the model on results of a benchmark research in the USA • Step-by step approach to improve purchasing processes • 8 strategic processes • 6 enabling processes For each proces there are elaborate checklists to analyse the current situation Lindi 2007

  8. 8 strategic processes Lindi 2007

  9. Example MSU Self Assessment Lindi 2007

  10. Further reading • For succes stories about MSU model: www.purchasingexcellence.nl • For 21 business cases of dutch companies in English (free of charge!) Lindi 2007

  11. MSU model of Monczka A more elaborate model, which stimulates thought and creativity It takes valuable time Processes 2 and 3 from the MSU model cover the same playing field as Kraljic A good tool to improve the whole purchasing function Kraljic’s portfolio Easy to use for a one time purchase A strong communication tool, to explain to non-purchasers Model could tempt users to jump to conclusions A good tool for defining a more simple purchasing strategy Conclusion Lindi 2007

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