Abstract
For a project to be delivered on-time and to an agreed cost in accordance with the specification, it is important to have an appropriate purchasing strategy. A project succeeds due to many factors, one of which is cost alongside timely delivery and quality. Formal purchasing strategies for different purchasing categories are common in the manufacturing industry, but less so in a project-based industry such as construction. The paper argues that purchasing strategies suited to the project-based nature of construction would improve project delivery and other success factors. The purpose of this study is to determine if a matrix could assist companies in the project-based industry to formulating their purchasing strategies. Case studies of five Australian construction companies’ purchasing practises were undertaken to support this work. There is evidence that, to remain competitive, it is necessary for companies to develop a network of well-established relationships with suppliers and subcontractors. Purchasing strategies need to be adapted to each purchasing situation as projects are rarely, if ever, the same. It is necessary, therefore, to adopt an approach that combines the best commercial deal and most effective collaboration.
Highlights
Depending on the nature of a project, there can be different kinds of suppliers and subcontractors involved
The second hypothesis is: H2: As projects are unique, it is relevant to modify the supply risk axis of the Kraljic matrix to instead highlight the complexity of a purchase in terms of need of information and project specificity
The first hypothesis was: Purchases of high project specificity is less suitable for centralized purchasing and needs to be handled by the project team or a subcontractor
Summary
Depending on the nature of a project, there can be different kinds of suppliers and subcontractors involved. Some might necessitate more involvement than others from the buyer’s side, with the extent of it depending on the complexity of the product or service. Purchasing strategies are crucial for a construction company as purchased products and services. The Kraljic (1983) matrix (or portfolio purchasing model) is regarded as the most widely used model for mapping purchasing strategies for different products and services, and combinations of them. The Kraljic matrix has been applied to the construction context before, mostly through quantitative studies and with its original axes: strategic impact and supply risk. Bildsten et al (2010) extended the Kraljic matrix with one extra square to emphasize the mix between leverage and strategic products and quantified it in terms of purchasing value. Abbasianjahromiet al. (2016) used mathematical modelling for subcontractors’ categorization into the Kraljic matrix. Bildsten et al (2010) extended the Kraljic matrix with one extra square to emphasize the mix between leverage and strategic products and quantified it in terms of purchasing value. Bildsten (2014) made an empirical study of qualitative nature of industrial building where she redefined the axes depending on the nature of the relationship
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