Strategic items

In Fig. 4.12 the different components have been characterized according to their importance. The specialized components are placed on top of the hierarchy. In our example the motherboard is a core element of the company and should therefore be kept in-house (make). The chipset is a strategic item with only a few specialized manufacturers on the market and therefore has to be outsourced (buy). The components which are placed underneath the core components in the hierarchy are not of strategic importance but are mainly specified components. Computer cases on the second level of the pyramid are therefore leverage items. The computer screen as well as the keyboard are noncritical items which are placed last on the hierarchy level. The components which are part of a mass... 

Strategic items are characterized by high profit impact and high supply risk. Traditionally, the sourced items add high value to the purchasing firm s performance, which results in long-term contracts. Central criterion for these items is the assurance of availability. 

Leverage items Computer case Strategic items Motherboard... 

The strategic items are the core items of the product which are manufactured in-house. In the matrix one can see that the supply risk is very high as is the profit risk. These modules, such as the motherboard in our example, have a high impact on the quality and performance of the product... 

Figure 5.9 only shows the first step of the Kraljic matrix. In a second step the balance of strategic items can be assessed with the help of die purchasing matrix. 

The morphological box in Fig. 5.10 shows the different modules according to their product categorization. For example, the screen and keyboard are two different product modules that are noncritical items, whereas the motherboard belongs to the strategic items. 

Gaps can furthermore be seen within the supplier area, where bottleneck and noncritical item and their buyer-supplier relationships are rather transaction based. Leverage items are standardized processed and information sharing is medium-low. The strategic items and their buyer-supplier relationship is based on a strategic alliance and their level of information sharing is high. The gap... 

In comparison Korea selected only 19 strategic items in 2005 in consideration of the international competition and... 

Figure 4.9 shows classification into four categories bottleneck, non-critical, leveraged and strategic items. Each of the four categories requires a distinctive... 

Choosing the right relationship which relationship is appropriate in different circumstances - bottleneck items, strategic items, non-critical items and leverage items. 

Strategic items are those for which the buyer has strength but there are few available suppliers. In this situation, purchasing should use its strength carefully to draw suppliers into a relationship that ensures supply in the long term. 

Strategic items Develop supplier relationships and partnerships, switching suppliers is difficult, increase role of selected supplier, strive for effectiveness, supply continuity, and technical expertise is more important than price, prepare contingency plans, and requires a great deal of negotiation. 

---