Question 1
The percentage spend for each category
Total amount spent: 170+20+3+23+288= 504
| Spend Category | Percentage Spend |
| Production Machinery | 170/504=33.73% |
| Maintenance | 20/504=3.97% |
| Hardware | 3/504=0.6% |
| Sheet Metal | 23/504=4.56% |
| Electronic Components | 288/504=57.14% |
Question 2
| Spend Category | Spend Category |
| Production Machinery | High |
| Maintenance | Low |
| Hardware | Low |
| Sheet Metal | Low |
| Electronic Components | High |
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Production Machinery
Sourcing decisions in any organization are dire because they affect the overall company operations (Carter & Giunipero, 2010 ). The production machinery is a high complexity item because of its importance in a firm as it adds value to the overall output and also because it impacts greatly the firm’s profitability. The failure by a company to procure production machinery will have a great impact on its operations and since there are only two suppliers, failure by the two to meet the required procurement specifications can be risky and costly for a firm.
Maintenance
Maintenance is classified in the low complexity category and it comprises the procurement ownership and cost. Though maintenance adds value to the organization, there is little concern that it would affect significantly the core operations of the business. However, in cases where it requires specialized skills the costs would go up. It is therefore important to consider its value to the company’s operations so as to evaluate the complexity effect it has on procurement costs.
Hardware
Hardware is classified as a low complexity item, with a cost of $3000 and ten suppliers. The cost for a supplier in this category is also the lowest. When a company focuses on improving performance, the costs of purchasing hardware as well as the value it has on a firm’s operations ought to be considered. In this category, the risks of supply disruption are low and this has a huge impact on the overall value of production.
Sheet Metal
Sheet metal is classified in the low complexity category with seven suppliers. Since it comprises the procurement cost and ownership, the firm ought to assess the impact it has on the operations. However, with the low cost of $23, 000 and seven suppliers, this means the risks of supply are low.
Electronic Components
They have the highest complexity and they have a huge impact on the overall performance of the organizations (Monczka et al., 2016). Electronics are used in almost all departments of the organization and thus they have a high spend. However, they have a low risk because they have five suppliers and because and can be easily managed.
Question 3
|
Bottle Neck Items Maintenance Sheet Metal |
Strategic Items Production Machinery |
|
Routine Items Hardware |
Leverage Items Electronic Components |
Question 4
Production Machinery
This has been placed as a strategic item because it is critical to any organization (Padhi, Wagner & Aggarwal, 2012) . It has the highest spend and with two suppliers which makes it a high risk because it is hard to source.
Hardware
This has been placed as a routine item because of its low cost and low risks. This is the item with the lowest spend and it also has the highest number of suppliers.
Electronic Components
This has been placed as a leverage item because of its high spend and low risk. The electronic components in the organization are easily managed and are strategically vital to the company (Padhi, Wagner & Aggarwal, 2012) .
Maintenance and Sheet Metal
They have been placed in the bottleneck items because they have a low spend, but have a huge impact on the operations of the company. These can be difficult to manage or source because the quality is highly required.
References
Carter, P. L., & Giunipero, L. C. (2010). Supplier financial and operational risk management. Tempe, AZ: CAPS Research .
Monczka, R., Handfield, R., Giunipero, L., & Patterson, J. (2016). Purchasing and supply chain management (6th ed).
Retrieved from https://www.vitalsource.com
Mulder, P. (2013). Kraljic portfolio purchasing model .
Retrieved from ToolsHero: https://www.toolshero.com/strategy/kraljic-portfolio-purchasing-model/
Padhi, S. S., Wagner, S. M., & Aggarwal, V. (2012). The positioning of commodities using the Kraljic Portfolio Matrix. Journal of Purchasing and Supply Management , 18 (1), 1-8.
