Sourcing: The Heart of the Matter

Book Review: Sourcing Portfolio Analysis by Andrew Cox

These days there is no shortage of advice for procurement and supply chain management practitioners, be it from blogs, white papers, surveys, consultancies and, somewhat less often, well-written books that delve deeper into the subject. It seems that we have reached a point where a consensus has formed around the category management process and its key components. Moreover, we are at a stage where early research into the ‘best practices’ of the automotive sector has been copied and massaged into a popular orthodoxy in common use across pretty much all business sectors. Within the category management methodology, the reliance on the analysis tools of Kraljic’s portfolio analysis and Porter’s five forces is now standard practice.

Former Professor and founder of Birmingham University Business School’s MBA in Strategy and Procurement Management, and now Chairman of the International Institute for Advanced Purchasing and Supply (IIAPS), Andrew Cox is a long-time recognised big thinker in procurement circles. He led Birmingham’s pioneering research into the influence of relational power in supply chains, and has published several volumes detailing the inner workings of what makes business relationships succeed (and fail).

In his latest book ‘Sourcing Portfolio Analysis’ Cox sets out to challenge the current procurement orthodoxy and presents a more rigorous and robust approach to managing categories of supply. In doing so he takes on Kraljic and Porter, declaring them unfit as practical tools for sourcing decision-making. Before anyone thinks this represents some kind of heresy, it is worth pointing out that Cox’s is no work of vandalism. Instead he provides a dispassionate and systematic deconstruction of the Kraljic matrix, going as far as asserting that what are taken to be Kraljic’s recommendations are incomplete, plain wrong, or both. He does, however, acknowledge Kraljic’s undoubted contribution to procurement thinking, but suggests Kraljic’s best work is overlooked in favour of the over-simplified four-box matrix practitioners are most familiar with. He does a similar job in exposing the weaknesses in Porter’s analysis.

This will not be easy reading for many practitioners, or consultants who base their advisory practice on Kraljic and Porter. Cox’s language is deliberately precise and can seem dry to the unfamiliar reader; but his analysis is compelling and logically coherent. This book certainly repays concentration, as he successfully lifts a veil from the prevailing orthodoxy amongst procurement and supply chain management professionals. By focusing on ‘criticality’ and ‘power’, organisations can more effectively prioritise their categories of supply, and in doing so, secure the leverage necessary to motivate suppliers to respond to a much wider range of tactical levers than Kraljic ever suggested.

Cox is proposing nothing less than a paradigm shift and his case is as near as dammit to being watertight. His message is that there is a better, more rigorous and effective way of undertaking the procurement task, and this is how to do it.

He goes on to make a strong argument for considering procurement as a science, and in an age when we’re told that success in procurement is about soft skills to engage internal stakeholders, Big Data, alliance-partnering, even (God forbid) Procurement-as-a-Service, it is refreshing to find a book so successfully focusing on the fundamentals.

These ideas are the very heart of technical procurement skills, and any serious practitioner (or expert) should surely make themselves familiar with Cox’s arguments and approach. To those raised on Kraljic and Porter, expect to have your practices and current thinking genuinely challenged.

Cox is a little undercooked when it comes to providing a step-by-step prescription to practitioners keen to implement his thinking, leaving his ‘how-to’ guidance until the last chapter. He has promised to rectify this in the follow-up volume to this one, due before the end of 2015. That promises to be the procurement oracle for those determined to see the world as it is, and not necessarily as they would like it to be.

David Atkinson

 

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