Supplier Evaluation Selection

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1. Under the topic of category strategy development, what do you understand by portfolio matrix? Under what circumstances might an item fall into more than one quadrant, or evolve from one quadrant to another?
Category Strategy development is the process of developing an appropriate strategy for sourcing purchases through identification and selection supplier based on the category of purchase Portfolio Analysis is used for categorization of purchases based on the complexity or risk impact of purchase and the value potential of the purchase (Monckza et. al., 2016). This leads to the creation of a portfolio matrix as given below and provides inputs for developing strategy for sourcing of purchase.

Bottleneck (Complex Specifications and complex manufacturing process)
Strategy - Ensure Supply Continuity
Tactics - Decrease Uniqueness of Suppliers
Actions - Widen specification, Increase competition, develop new suppliers, medium term contract and appreciate competitor bidding
Critical (Large expenditures, design and quality critical)
Strategy - Forming Partnership with suppliers
Tactics - Increasing role of selected suppliers
Actions - Huge negotiations, supplier process management, preparing contingency plan, analyzing market/competition, Use of functional specifications
Routine (Many alternative products and sources of supply available)
Strategy - Simplification of acquisition process
Tactics - Reduction of buying efforts through development of systems
Action - Autmoting purchase requisition, rationalization of supplier base, Implementation of Electronic Data Interchange

Leverage (High Expenditure on commodity items, large market place capacity, sufficient inventories, many alternative products and qualified sources of supply)
Strategy - Maximization of commercial advantage
Tactics - Maintain competition and concentrate on business
Actions - Encouraging bidding and exploitation of market cycles and trends, actively sourcing of products and using industry standards

The above figure depicts four quadrants and the categorization has been done based on the complexity or risk involved and the value potential and therefore, the purchase strategy can be categorized as:
1) Bottleneck - These are the commodities which require more technically complex specifications and manufacturing processes and the number of suppliers are limited. There are higher risks of interruptions in supply and their impact is severe and therefore, the strategy to be used in case of such products is to ensure the continuity of supply (Monckza et. al., 2016). Since the number of suppliers are few, there are possibilities of suppliers becoming unique and therefore the organization must aim at decreasing the uniqueness of the supplier through development of new suppliers and inviting competitive bidding (Monckza et. al., 2016).
2) Critical - This category of product is more technical and specialized suppliers are required for the purchase and the need is to have partnership with these preferred suppliers as quality and product design is very important (Monckza et. al., 2016).
3) Routine - This category of products has more routine purchase requirements with many alternative products and suppliers available in the market and due to this reason, there is a need to develop an automated system of supplies and the order generation process can be automated in order to save costs (Monckza et. al., 2016).
4) Leverage - This category of purchase is provides the most favorable situation for the company with low supply risk and a high value potential wherein there are large number of suppliers are available that can weaken their bargaining positions (Monckza et. al., 2016). Such kind of purchase requires huge expenditure and therefore, the organization can be more demanding from the `suppliers in terms of quality (Monckza et. al., 2016). Therefore, the company can invite for competitive bidding so as to save the costs (Monckza et. al., 2016).
These positions of the organization can change in case the company changes its market segments or there is a change in consumer demand. For example, if the company chooses to target high end consumers, the position may shift from being a leverage to a critical purchase. This is justified by the findings of case study undertaken by ...