Supply chain redesign for lead-time reduction through Kraljic purchasing portfolio and AHP integration

Abstract

PurposeThe purpose of this paper is to provide a flexible and extensible model for the classification of suppliers, within the purchasing guidelines and market trends of an Italian small company, leader in the production of street lamps. The model is applied to identify critical supply chains with the final objective of lead-time reduction.Design/methodology/approachThe model is obtained by the application of the purchasing portfolio analysis through the construction of Kraljic matrix. Profit impact and supply risk criteria are selected according to the main company requirements, and then prioritized by the analytical hierarchy process (AHP). Finally, supply chain lead-times are analyzed with Gantt diagrams.FindingsThe application of the model allows the determination of company criticalities in terms of high lead-times and of the involved suppliers. The analysis of critical suppliers positioning in the Kraljic matrix allows the definition of some possible strategies to implement for lead-time reduction.Research limitations/implicationsPurchasing portfolio analysis and Kraljic matrix are practical instruments to quickly frame company purchasing situation, but their application is not simple due to the numerous and different factors involved, especially in small and medium enterprises (SMEs), where resource are scarce and several constraints limit operations. The objective of the research is the development of a practical tool for strategic purchasing, simple and robust to be implemented in SMEs, with limited resources and access to quantitative supplier data.Originality/valueEvaluation criteria definition is one of the most difficult phases, such as their univocal and quantitative comparison. The problem of selecting and prioritizing both quantitative and qualitative criteria for suppliers classification is overcome with the combined application of Kraljic matrix and AHP. The newly integration of the two methodologies allows the realization of a reliable and robust model for suppliers classification, which can be easily adapted to company business strategy changes.