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Supply Market Complexity

Supply Market Complexity

Supply Market Complexity

Qn 1.Kraljic measures strategic importance through:

  • Impact on costs
  • Impact on quality
  • Impact on competitive advantage

Consider a company that produces chemical products (e.g., Dow or Dupont). Try to list a variable that can be used as an alternative or in addition to one of the previous ones to measure strategic importance. Briefly justify your answer.

Qn 2. Kraljic measures supply market complexity through:

  • Market concentration
  • Impact on logistic costs
  • Production capacity saturation

Consider a wholesale company (e.g., Walmart or Target). Try to list a variable that can be used as an alternative or in addition to one of the previous ones to measure strategic importance. Briefly justify your answer.


Qn 3. An elevator is designed for a specific building, considering such factors as the height of the building, the number of users on each floor and the expected usage periods. The number of components varies with the number of stories and the complexity of the design of the elevator. Customers provide functional requirements such as speed and capacity, desired style options, and the dimensions of the building. An appropriate set of elevator components is specified and ordered from the component suppliers. This is a high-variety, low-volume market in which competition is very high. As the cost of in-house manufacturing of components is much higher than the cost of outsourcing, manufacturers of elevators focus on design, assembly, marketing and sales, and most in-house component manufacturing has ceased.

Let’s consider the case of two different electric elevator manufacturers:

  • Company A is a Small Medium Enterprise (SME) that employs 73 employees and, in 2019, recorded $ 12 million in revenues. They offer 20 elevator variants using a make-to-order approach.
  • Company B is a bigger company that employs over 300 employees and, in 2019, recorded over $ 100 million in revenues. They offer over 100 elevator variants using a make-to-order approach.

The following figure compares the Kraljic matrix for the two companies. In both cases, the Kraljic matrix was designed using the same approach.

2010_A portfolio model for component purchasing strategy and the case study of two South Korean elevator manufacturers.jpg

Which of the following statements is true?

Note: More than one can apply.

Group of answer choicesCompany A should have a supply based that is mostly made of local suppliersCompany A has a better balance of power with its suppliers compared to Company BCompany B has too many non critical itemsCompany A does not manage well its purchasing categoriesPartnerships with car suppliers should be put in place with car set supplier in both companies

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