Kraljic, Supply and the Procurement Body of Knowledge – more from Andrew Cox

The debate following Sigi Osagie’s two “Aristotle or Kraljic” articles has been excellent! (I will save my personal contribution for a bit longer, I think). We have had high-quality, thought-provoking contributions from a number of people, and thanks to all of them, with a special mention to Andrew Cox. His most recent comment was a whole article in itself, so he has agreed to let us publish it as such. Having previously been Professor at Birmingham University, Cox now runs IIAPS, the International Institute for Advanced Purchasing and Supply.

The background here is Cox responding to other comments on Osagie’s part 1, particularly from my US colleague, Pierre Mitchell. (Part 2 of Osagie’s original article is here). The debate centres around the relative importance of “managing stakeholders” versus “understanding analytical tools” as procurement capabilities, with a detour into the positives and negatives of Kraljic’s analysis!

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At the risk of bemusing the audience further can I reply to your fulsome responses with a few comments that I believe may be relevant...

  1. I have nothing against innovation or anyone challenging existing models, nor do I believe I said that. My comments below will show clearly that I am more than happy to challenge existing models/theories myself.
  2. My original comment was focused on my belief (contrary to Sigi’s position) that being able to correctly analyse the situation you are in, and make appropriate recommendations for the business as a buyer is more important than the ability to sell what you believe/know to stakeholders. I still think this is the correct way of thinking, even though I recognise that having the ability to sell what needs to be done to stakeholders is a real benefit.
  3. My second comment (and it is not a new one) is that, while I think analytical tools are more important than behavioural skills, I unfortunately believe Kraljic’s methodology is neither rigorous (i.e. it does not consider all of the variables that need to be analysed when making sourcing recommendations) nor is it fully robust (i.e. the internal logic of the recommendations made in the quadrants identified are not coherent and often lead to gross sourcing errors by those using this methodology).
  4. If I am correct about this, then anyone who uses this methodology (i.e. most academics, practitioners and consultants) is guilty of making the same errors, and if they then also choose to tamper with the variables that inform the x and y axes, and also fail to change the recommendations within the quadrants, we end up with ‘a dog’s breakfast’ analytically (i.e. nonsense built on very shaky foundations). Unfortunately my observation of the use of te flawed and misguided Kraljic methodology is more ‘dog’s breakfast’ rather than Cathedral! I have written fairly extensively about this in books and articles over the years, but a short summary (which also explains why the Purchasing Chessboard also lacks rigour and robustness) can be found @ http://www.iiaps.org/pdf/WP-ImprovingProcurementCompetence.pdf
  1. Having clarified what I was trying to say can I now say that, despite the fact that I appear unintentionally to have upset you, I am genuinely impressed by the range and depth of your thinking, even though the experience so far has been a bit like watching a large firework display go off!

I do hope you will understand this later comment is not intended as a criticism, but genuine recognition of a fertile and lively mind clearly trying to get ideas across as quickly as possible.

That said, can I say that while I agree with you that ‘supply’ is exactly what we should be focusing on I have a number of concerns with some of your comments that are briefly listed below:

a) It would make no difference to the internal rigour or robustness of the Kraljic model even if you changed the axis to ‘Importance of Supply’ because the intellectual foundations and recommendations are in my view fundamentally flawed. There is insufficient space to fully explain why here but:

b) The Kraljc model is a static, non-dynamic methodology and completely fails to address (except tangentially in its completely undeveloped 9 Box Power Matrix) the key issues in buyer and supplier exchange (namely the power resources available to both parties to achieve their goals). In other words it fails to address the issue of the ultimate purpose and goals of the firm/organisation and how its performance should be measured when it interacts with suppliers and vice versa!

c) If ‘Supply’ is so important (and I agree that it is) why is your journal/blog site called Spend Matters? The gravest error in all current performance management thinking is the unrelenting focus in the profession on one KPI–cost savings. This has led directly to the development of ‘categories of spend’ rather than ‘categories of supply’ thinking. Are you (i.e. ‘Spend Matters’ not you personally) part of the problem or the solution?

d) Is it possible/sensible to manage supply issues from within a silo management based function (whether you call it Procurement, SCM or Purchasing)?

e) How is the profession going to identify the best practice models, tools and theoretical approaches (i.e. what Peter calls the ‘professional body of knowledge’) if there is no forum to debate the intellectual and practical rigour and robustness of particular models/theories? I ask this because over the last 20 years I have been trying to get such a debate going and have been met with a wall of indifference in the profession. In other words how do we overcome the problem of ‘regnant orthodoxy’ or what I prefer to call ‘the tyranny of the usual practice’?

I am not certain this is the right forum for this discussion but if you only get the chance to have a chat with a few intelligent people each year it is worth it in my view – whatever disgruntled practitioners may think.

Voices (2)

  1. Andrew Cox:

    Ian,

    Are you from Missouri?

    This is an interesting, but ultimately overly defensive argument

    I do not doubt that you can stimulate the flow of ideas by using Kraljic. That is not what is being argued. It is the quality of the ideas that it is at issue.

    I guess you would only fully understand what I am trying to explain if I took a category you were working on and then applied alternative ways of thinking to it than the Kraljic methodology.

    My guess is that you would only believe the alternative is superior if it demonstrably resulted in far better sourcing outcomes/options than those you could have identified from using Kraljic?

    If this is the case then even you must agree with my argument about rigour and robustness. If you do not then you do not care whether the tools you use are fully rigorous or robust. You just like using what you have always used?

    To use the tool analogy.: when I was a boy we could only use simple spanners, nowadays you can use diagnostic analytics and have full torque sets. I know which I think is most useful when completing a task!

    .You may be surprised if you try some of the superior tools that are now available yourself in the future.

  2. Ian Heptinstall:

    Surely Kraljic is a single tool, rather than an all-encompassing strategy-creating machine? I dont think any single tool or framework can – or should – make this claim.

    Kraljic is a tool. A useful tool, and Andrew’s paper doesn’t convince me that I am mistaken here.

    To pick up Sigi’s original mechanic analogy, I wouldn’t trust any mechanic who used just a single tool. No matter how skilled he was in its use. Arguing Kraljic is better/worse than Power Matrix et al, is like arguing a torque wrench is better than a multi-meter. It shouldn’t be either/or.

    To me the point of good/strategic procurement is to get business benefit that helps you find a decisive competitive edge, that competitors find hard to emulate. Tools like Kraljic, purely give us insight and ideas. When it comes to these frameworks, I would say “the more the merrier” – up to a limit of course. If something works in your organisation, category or crossfunctional team, then it is a good tool in my eyes. I would prefer my mechanic to have a complete tool kit rather than a couple of spanners and a screwdriver.

    Using “Kraljic” (in my own way ;-)) is one tool that rarely fails to bring valuable insight. But it isn’t the only one.

    I don’t think we are looking for “truth” or even “rigour”, we are looking for an insight that helps us to trigger a good idea, or to gain insight into a risk or obstacle. Systems Theory would say that most businesses are not linear deterministic processes, where you just turn the handle and out pops the right answer. They are dynamic complex adaptive systems, where the interactions between the elements are more influential than each element itself, and innovation is a creative, collaborative, and messy process, that cannot be guaranteed by following an 8 (4/6/7..) step process and filling in templates.

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