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The impact of Kraljic on your Teamcenter Implementation

 

The Kraljic Matrix from Peter Kraljic was first described in an article “Purchasing must become Supply Management” in the Harvard Business review. The Kraljic Model can be used to analyse the purchasing portfolio of a firm.

 

 

The Kraljic framework is based on two dimensions for classifying a firm’s purchased materials or components (see figure):

 

·         Profit Impact: The strategic importance of purchasing in terms of the value added by product line, the percentage of raw materials in total costs and their impact on profitability

 

·         Supply Risk: The complexity of the supply market gauged by supply scarcity, pace of technology and/or materials substitution, entry barriers, logistic cost or complexity, and monopoly or oligopoly conditions

 

The model then distinguishes between the following 4 product categories

 

1.       Leverage Items

 

·         Definition: Leverage Items are products that represent a high percentage of the profit of the buyer and there are many suppliers available. It is easy to switch supplier. The quality is standardized

 

·         Buyer-seller power situation: buyer dominated, moderate level of interdependency

 

·         Recommended purchasing strategy: Tender, vendor selections, targeted pricing, umbrella agreement with preferred  suppliers. Call-off orders are then placed as an administrative formality

 

2.       Strategic Items

 

·         Definition: Strategic Items are products that are crucial for the process or product of the buyer. They are characterized by a high supply risk caused by scarcity or difficult delivery

 

·         Buyer-seller power situation: Balanced power, high level of interdependency

 

·         Recommended purchasing strategy: Strategic Alliance, close relationships, early supplier involvement, Co-Creation, consider vertical integration, long-term value focus

 

3.       Non-critical Items

 

·         Definition: Non-critical Items are products that are easy to buy and also have a relative low impact on the financial results. The quality is standardized

 

·         Buyer-seller power situation: Balanced power, low level of interdependency

 

·         Recommended purchasing strategy: reduce time and money spent on these products by enhancing product standardization and efficient processing

 

4.       Bottleneck Items

 

·         Definition: Bottleneck Items are products that can only be acquired from one supplier or their delivery is otherwise unreliable and have a relative low impact on the financial results.

 

·         Buyer-seller power situation: supplier dominated, moderate level of interdependency

 

·         Recommended purchasing strategy: Volume insurance contract, Vendor Managed Inventory, keep extra stocks, look for potential suppliers

 

Now is the question, how to translate this procedure into  a PLM System like Teamcenter?

 

Depending on the Kraljic value the Release Procedure will be different. For example Strategic Items need to be reviewed by more people in the organisation. Non-Critical Items can perhaps be released by the end user himself.

 

To identify the Kraljic Code we have to define a classification code on the Item Type Revision. To be sure we use the correct value we are going to define a LOV on this attribute in the BMIDE.

 

The value used on the ItemRevision will be defined by an end user. That is also one of the problems, because the question will be: who is responsible for the correct value? It is possible to have an extra review to let a Project Manager check the Krailjic Code, but in this case the End User will be responsible to define the correct value.

 

 

It is possible to make this attribute mandatory in, that case you have to define the attribute  the moment the Item is created. A better solution is to check if there is a value defined the moment the Workflow will be started.

 

after we have checked whether a value is completed, we need to determine what the value is. This will be done with a condition task.

 

 

 

Based on the result the Workflow will follow a path. In this case for the Non-Critical Items (3) there will be no Review task and the target will get a status immediately. For the Bottleneck Items (4) there will be only 1 Review task and Leverage Items (1) there are 2 and the Strategic Items (2) will have 3 Reviews.

 

 

All of the rejects paths go true an Or task to a Do Task (Change). Since Teamcenter 10 it is more simple to track all the comments in a Workflow.

 

 

 

Conclusion

 

Of course this is only an example and you can make it as complex (or as Simple) as you want.  This example shows a simple way to follow a particular path based on a value defined on an Item(Revision) or a Form defined in the Workflow.

 

Most critical in this example is defining the value of the Kraljic Code. This can be solved by using an extra Review to check the value by a Project Manager.  

 

Source: http://www.12manage.com/methods_kraljic_model.html

 

 

 

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