Rubber Vent Hose Sourcing Decision

Kraljic Matrix – Purchasing Portfolio Classification

• Rubber Vent Hose - Non-critical item
AutoParts Inc. Electroparts Caltech
Ranking Yellow Green Red
Price Lowest 10% more Lowest

• Before taking the sourcing decision, find out why

Caltech is ranked in the ‘red’ category
• If Caltech is in red category due to quality,
AutoParts should be preferred due to low cost and
non-criticality of the component
 Changes in scorecard
The Supplier Scorecard must make sure to continually assess and review the external
environment to make sure that it responds to external factors, and take them into account,
during strategic decisions, and strategy devising
Different weightage for quality, timing and delivery depending on which quadrant the
component lies in the kraljic matrix
Constantly changing standards which resulted in suppliers moving to the ‘No-quote’ category
constricted the supplier base too much. It was difficult for them to negotiate lower prices
from such a small set of suppliers
Incentivize suppliers to improve quality standards in order to move from red/yellow category
to a green category
 Changes in purchasing function
Find out supplier price margins and costing from past records, so that the purchasing team
can negotiate better prices.
Buyer- Their compensation depended on the percentage of price reductions negotiated
and the final price relative to targets set by the program management team. The buyers
therefore desired a clear picture of both the cost and quality implications associated with
sourcing one supplier over another for an automotive component.
This compensation structure may lead to bias for buyers during supplier selection and may
neglect quality in their final decision making