In a recent post over on Procurement World, the procurement dynamo asks if the Kraljic Matrix [is] Actually Becoming Obsolete? He notes that since Kraljic published his classic article 33 years ago, world trade has quadrupled, globalization has exploded, and Procurement is operating in a much faster, bolder, world than it was in 1983.
In this brave new world, Procurement has to manage ethical supply chains and practice good Corporate Social Responsibility, or its CPO could be personally convicted of criminal charges and end up behind bars. (While this is a great place for many sociopathic CEOs, it’s not where ethical and hard working CPOs deserve to be.)
the procurement dynamo notes that, in some ways, the Kraljic matrix still works well. The heart of the Kraljic matrix, segmentation into manageable buckets that can be addressed with consistent strategies, is still valid, but the degree of segmentation needs to be much deeper now than it used to be. However, even the concept of a 3-d Rubik’s cube doesn’t quite capture the level of segmentation required in today’s supply chain.
It used to be supply risk and financial risk was enough. Now there is information risk, sustainability risk, compliance risk, ethical risk. That’s significantly more than a cube can handle. (We’re at a six-dimensional hypercube, and we’re just starting.) That’s why we have to adopt Value Based Sourcing and replace TCO (Total Cost of Ownership) with TVM (Total Value Management), which is the root of all value models.
This is challenging, as the procurement dynamo points out, but not impossible, especially for the White & Nerdy. It doesn’t matter if they look like they are still in the 80’s, insist on riding segways down the hall, or shout blasphemies in Klingon while trying to solve the problem. As long as the problems get solved, which only the IQ and TQ-savvy white & nerdy can do, that’s the way forward.