The lower right quadrant in Peter Kraljic’s 2×2 “Stages of Purchasing Sophistication” matrix from “Purchasing must become Supply Management” is still relevant for many procurement executives thirty years after it was first published in the Harvard Business Review in October 1983. Items which appear in this quadrant are referred to in Kraljic’s paper as those “which can only be acquired from one supplier or their delivery is otherwise unreliable.” While outsourcing can seem ideal for dealing with this type of spend, it still solves only part of the problem – shifting responsibility to a third party but not addressing the fundamental issues at hand such as better planning, increased control of the procurement process, and better visibility into inventories.
In an excerpt shared with Spend Matters from the “MRO Integrated Supply in North America” report, Smart Cube offers six potential solutions for resolving bottleneck spend issues, which require procurement executives to work closely with suppliers:
• Storeroom redesign and SKU standardization
• Assessment and analysis of MRO materials usage and optimum inventory level
• Planning and forecasting of MRO materials requirements and optimum stock levels
• On-site inventory management personnel to check inventory levels and place product orders
• Inventory management IT systems that can be integrated with the company’s internal systems
• Customization, installation, and maintenance of inventory dispensing systems for often-used MRO items, consumables, and low-value items
We agree with the suggested solutions, somewhat self-serving, they require technology enablement but that will also create a more sustainable, long-term solution. It also ensures accountability remains where it belongs, namely with your management and their teams.