Managing Diversity in Purchasing - On the Use and Misuse of Purchasing Portfolios for Managing Purchasing Processes

Several portfolio approaches for the purchasing area have been developed in the past. The main reason was to enable companies to follow differentiated sourcing strategies depending on the classification of different purchase items within a defined portfolio. This should enable companies to exploit the value of tailored purchasing approaches for different items or under different circumstances.Initial field research about the practical use of existing sourcing portfolio approaches revealed that the practical use remains limited. Main reasons seem to be organizational barriers such as ineffective collaboration among functional areas (e.g., purchasing, development and marketing) and an often insufficient link of sourcing to the overall strategy. Furthermore, the classification into a defined sourcing portfolio is often based on estimates of end-custumer preferences by engineers and buyers without considering the end-customer's cost-benefit trade-offs. As a result, item-overspecifications and thus unintended supplier monopolies can emerge. A first overview of best practice approaches was established to help to overcome the identified inefficiencies.