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Application of Kraljic's Purchasing Portfolio Matrix in an Undeveloped

Logistics Infrastructure: The Staatsolie Suriname Case

Article  in  Journal of Transnational Management · June 2008

DOI: 10.1080/15475770802059610

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 Application of Kraljic’s Purchasing
Portfolio Matrix in an Undeveloped
Logistics Infrastructure: The Staatsolie
Suriname Case
Cees J. Gelderman
Dennis R. Mac Donald

ABSTRACT. The Kraljic matrix has received large-scale adoption,

especially in Western Europe, as a tool for developing differentiated
purchasing strategies. However, it is not clear whether the Kraljic
matrix could be applied by companies operating in remote conditions
in a country or region where the logistics infrastructure is not well
developed. This paper reports on a literature study that is aimed at
identifying the necessary adaptations to the Kraljic matrix when
applied under remote conditions. Based on an action research project
within the State Oil Company of Suriname, the usefulness of the
adapted Kraljic approach has been explored.

Cees J. Gelderman is Associate Professor of Purchasing and Marketing

Management at the Open University of the Netherlands, The Netherlands.
Dennis R. Mac Donald, graduated at the F.H.R. Lim A Po Institute in
Paramaibo, Suriname, is Procurement Manager of the State Oil Company
of Suriname.
Address correspondence to: Cees J. Gelderman, Open University of the
Netherlands, PO Box 2960, 6401 DL Heerlen, The Netherlands (E-mail:
kees.gelderman@ou.nl) or Dennis R. Mac Donald, State Oil Company of
Suriname, PO Box 4069, Paramaibo, Suriname (E-mail: dmacdon@
staatsolie.com).

Journal of Transnational Management, Vol. 13(1) 2008

Available online at http://jtran.haworthpress.com
# 2008 by The Haworth Press. All rights reserved.
doi: 10.1080/15475770802059610 77
78 JOURNAL OF TRANSNATIONAL MANAGEMENT

KEYWORDS. Supply management, purchasing portfolio approach,

purchasing strategies, undeveloped logistics infrastructure

Empirical evidence indicates that firms can obtain competitive advan-

tage by managing supplier relations (e.g. Chen, Paulraj, & Lado,
2004; Mol, 2002; Dyer, 1996). Obviously, differentiation is needed
in managing supplier relationships, because all suppliers cannot be
dealt with in the same way. The need for differentiated supplier
relationships requires some sort of classification (Lilliecreutz &
Ydreskog, 1999). In general, purchasing portfolio models aim at
developing differentiated purchasing and supplier strategies.
In a seminal paper, Kraljic (1983) introduced a comprehensive
purchasing portfolio approach, including a matrix that classifies a
firm’s purchased items into four categories on the basis of their
profit impact and supply risk. Currently, Kraljic’s matrix is widely
used by purchasing professionals. Especially in Western Europe,
the Kraljic approach has received large-scale recognition and has
attained an increasing degree of adoption (Caniëls & Gelderman,
2005).
Kraljic’s matrix, including the four categories and corresponding
strategic recommendations, was developed around 1973 for BASF,
a European chemical multinational. Kraljic (1983) made a reasonable
case for the usefulness of his portfolio approach by describing the
experiences of four large industrial companies. Recent empirical
studies have corroborated the usefulness of the matrix in practice
(e.g. Carter, 1997; Lilliecreutz & Ydreskog, 1999; Gelderman &
Van Weele, 2003, 2005; Johnson & Wagner, 2004). However, these
studies were carried out in companies located in developed countries
under conditions of a well-developed infrastructure.
In many developing and former state-regulated countries, the
logistic infrastructure is poor, customs and regulations unclear and
inefficient, the logistics supply market underdeveloped, and the risk
for crime high (Andersson & Norrman, 2002). These conditions result
in relatively high supply risks, as the number of trustworthy or cap-
able partners is low and the few existing ones enjoy a better negotiat-
ing position. Obviously, for companies located in these environments
it is more difficult and more costly to develop close, productive rela-
tionships with their geographically distant suppliers. The challenge
begins with identifying and qualifying capable suppliers in regions
 Cees J. Gelderman and Dennis R. Mac Donald 79

of the world where buyers have little experience (Fawcett, 2000). It

remains unclear whether the Kraljic matrix could be applied under
such ‘‘remote conditions.’’ The concept remote conditions within
this study refers to a situation in which a company is operating
in a country or region where the logistics infrastructure for the
procurement of materials is limited or not well developed.
The main objective of this research paper is to identify and describe
the application of the Kraljic purchasing portfolio model for com-
panies operating in remote areas with an undeveloped logistics
infrastructure. Based on the literature study, a revised version of
the Kraljic approach has been developed, including adjusted dimen-
sions (factors), and strategic recommendations. This new purcha-
sing portfolio model was tested and refined by means of action
research in which the new model was used in practice. The model
was tested and evaluated in a location where the logistics infrastruc-
ture is relatively poor, namely at the State Oil Company of Suriname,
Staatsolie.

THEORETICAL BACKGROUND

The Kraljic Matrix

Kraljic (1983) introduced the first comprehensive portfolio
approach for the use in purchasing and supply management. Some
twenty years ago he advised managers to guard their firms against
disastrous supply interruptions and to cope with changing econo-
mic and technological dynamics. His message was that ‘‘purchasing
must become supply management.’’ In this context Kraljic (1983)
developed a convenient portfolio approach for the determination of
a comprehensive strategy for supply.
Kraljic’s approach includes the construction of a portfolio matrix
that classifies purchased products on the basis of two dimensions:
profit impact and supply risk (low and high). The result is a 2  2
matrix and a classification in four categories: bottleneck, noncritical,
leverage, and strategic items (see Figure 1). Each of the four cate-
gories requires a distinctive approach toward supplier management:
a strategic partnership for strategic items, competitive bidding
for leverage items, systems contracting for noncritical items, and
assurance of supply for bottleneck items (e.g., Van Weele, 2000).
80 JOURNAL OF TRANSNATIONAL MANAGEMENT

FIGURE 1. The Kraljic Matrix with Strategic Directions for All Categories,
Adapted for Remote Areas.

Remote Conditions
Remote conditions refer to geographically distant suppliers
where the buyer is located in a developing country with an
environment of poor or undeveloped logistics infrastructure
(Caddick & Dale, 1987; Fawcett, 2000). According to Fawcett
(2000), it is simply more difficult and more costly to develop close,
productive relationships with geographically distant suppliers.
Logistics problems have been identified as the main obstacle in
international sourcing.
As stated by Das and Handfield (1997), overseas transactions
affect lead times and lead times variability and carry increased risks
of supply interruptions. Other common problems in international
sourcing include buyer-supplier time-zone lags, costs of obtaining
post purchase supplier services, and rectifying errors in quality, part
count, and billing. In addition, the buyer is faced with the basic dif-
ficulty of forming a meaningful relationship with a supplier separated
by oceans, customs, cultures, and language.
 Cees J. Gelderman and Dennis R. Mac Donald 81

The challenges many less-developed countries face in building their

logistics systems are legacies of the past (Razzaque, 1997). These are
fundamental problems inherited from their embryonic trappings
and from lack of understanding of logistics’ role and importance.
Furthermore, Razzaque (1997) stated that a rich and expanding litera-
ture is available on logistics systems and management in advanced
nations, whereas the literature on those in developing nations is only
emerging. A survey of 532 publications on ‘‘logistics management’’
in major Western journals for the period January 1971 to June
1995 revealed fewer than 20 contributions on developing nations.
According to Das and Handfield (1997), a number of studies have
examined logistics in various countries and regions. Studies exam-
ining distribution systems in industrialized nations are most pre-
valent. Caddick and Dale (1987), Waters and Soman (1989) and
Cook (1989) concentrate on developing regions and remote areas.
These studies provide useful information on a range of issues pertain-
ing to international logistics.
In many developing or formerly state-regulated countries the
logistics infrastructure is poor, customs and regulations are unclear
and inefficient, the logistics supply market is underdeveloped, and
the crime risks are high (Andersson & Norrman, 2002). These factors
all contribute to a relatively high supply risk, as the number of
trustworthy and capable partners is low and the few appropriate
suppliers enjoy a strong negotiating position.
Goonatilake (1990) provides useful insights into inventory
management practices in developing countries and contrasts them
with those in developed countries. In developing countries inventory
control is lax and bureaucratic with little pressure to meet delivery
dates and inventory costs; infrastructure is poor; many supply
sources are overseas, and companies must deal with a shortage of
trained personnel. If a country does not have a good base network
of dependable transportation, warehousing, communication, and
other related facilities, desired configuration of the network by the
firm will be difficult. Literature indicates that many less-developed
countries lack an environment conducive to the development of a
good logistics system (Das & Handfield, 1997).
According to Razzaque (1997), problems of logistics systems and
barriers to logistics development are unique to each country. The
provision of links between productivity facilities and consuming
units, which is the fundamental role of logistics, is affected by
82 JOURNAL OF TRANSNATIONAL MANAGEMENT

differences in various country-specific factors such as geographical

features, socioeconomic and politico-legal systems, cultural realities,
industrial development, and resources endowments.

Adaptations to the Dimensions

The characteristics of remote conditions can be used to identify the
adaptations that must be made to the dimensions of the Kraljic
matrix if the tool is to be applied in less-developed countries.
The dimensions as used in the Kraljic matrix are the ‘‘profit
impact’’ and the ‘‘supply risk.’’ Poor logistics infrastructure nega-
tively influences lead times and therefore increases the supply risk.
It is clear, therefore, that an undeveloped logistics infrastructure
should play a significant part in the Kraljic approach. However,
the Kraljic approach does not explicitly deal with issues of logistics
and infrastructure. The logistics covered by Kraljic do not deal with
an undeveloped logistics infrastructure; Kraljic deals with normal
practices with respect to the logistics infrastructure. However, in an
undeveloped logistics infrastructure the supply risk is particularly
influenced by remoteness factors. Table 1 provides an overview of
the factors that are specifically focused on remote environments.
Profit impact is less dependent on the location of the company,
whereas in supply risk additional factors play a critical role. These
factors increase the supply risk for remote areas.

Impact on the Strategic Recommendations

The strategic recommendations for the items in the Kraljic matrix
are most usually limited to a single strategy per quadrant: a strategic
partnership for strategic items, competitive bidding for leverage
items, systems contracting for noncritical items, and assurance of
supply for bottleneck items (e.g., Van Weele, 2000). In an empirical
study based on three in-depth case studies, Gelderman (2003) found
that practitioners distinguish between several separate purchasing
strategies for each portfolio quadrant. Some of these strategies
focused on keeping the current position in the quadrant, whereas
other strategies were directed toward moving to another position.
The case studies revealed that, in addition to Kraljic’s theory, experi-
enced practitioners were very aware of the different choices within
each quadrant. These strategies are also applicable for remote areas,
but as the supply risk in a remote environment is mainly influenced
 Cees J. Gelderman and Dennis R. Mac Donald 83

TABLE 1. Factors Determining Dimensions of the Kraljic Matrix for

Remote Environments

Dimensions and factors

Profit Impact
Volume purchased and
Expected growth in demand
Percentage of total purchase cost
Impact on product quality
Business growth
Supply Risk
Market conditions
Availability=scarcity
Number of suppliers
Competitive demand
Make-or-buy opportunities
Storage risks
Substitution possibilities
On-time delivery (lead times)
Cultural differences
Lack of logistical knowledge
Supply interruptions (strikes, hurricanes, etc.)
Duty and customs regulations
Shortage of qualified personnel
Complicated import procedures
Payment conditions
Logistical-related facilities (harbor, roads, warehouses, communications, etc.)

by the logistics, the company must therefore put more effort into
strategies that improve the logistics framework of the supplies. These
strategies will decrease the supply risk and will be useful for
bottleneck and strategic items. Figure 1 presents the main strategic
recommendations in the Kraljic matrix, based on the conditional
dynamics, which were reported in Gelderman and Van Weele (2003).
Due to the increased supply risk for remote areas, which is
especially associated with logistics problems, this paper recommends
the following two additional strategies specifically for bottleneck and
strategic items (illustrated in Figure 1 as strategy 10 & 11).

Use of Remote Purchasing Agents

Depending on the purchasing volume, a strategy to consider is to
use purchasing agents as intermediaries between the remote supplier
84 JOURNAL OF TRANSNATIONAL MANAGEMENT

and buyer. As purchasing agents will be responsible for supplying a

major part of buyers’ materials and supplies, they will be forced to
manage the flow of material from suppliers’ warehouses up to the
supplier’s export harbor or even up to the buyer’s import harbor.
As purchasing agents they will also monitor the processing time of
the orders and will be able to secure payments to the supplier, pack-
ers, forwarders, and ‘‘third party logistics,’’ which will lead to a fast
release of materials and therefore decrease the supply risk. Accord-
ing to Knemeyer and Murphy (2004), third party logistics concerns
the relationship between a shipper and a third party.

Integrated Logistics Management System Between Buyer and

Supplier
A sophisticated integrated logistic management system at buyer
and supplier or purchasing agent facility will give real-time
information on material flow. The buyer can therefore take proactive
actions whenever any deviation on processing time might occur.

METHODOLOGY
A five-step approach as outlined by Gelderman (2003) is used to
systematically fill in the matrix and to identify the strategic recom-
mendations for a particular firm or industry. This approach consists
of five successive steps, main questions and issues that must be
addressed: (1) preparation; (2) design and filling in the matrix; (3)
interpretation of results; (4) strategic actions; and (5) evaluation
and follow-up.
During the preparation phase a team was formed that has a clear
understanding of the objective of this research within the company.
The main objective was to investigate the application of the Kraljic
purchasing portfolio matrix for remote areas and to validate the
adjusted portfolio matrix within the company.
A period of three months was scheduled to conduct the research
with a team consisting of the Procurement Manager, Procurement
Administrator, Industrial Engineer, Procurement External Consult-
ant, and for final consultation, meetings were scheduled with the
Production Operations Manager, the Engineering & Development
Manager, and the Technical Services Manager.
 Cees J. Gelderman and Dennis R. Mac Donald 85

In the database, about 6,700 items are grouped into approximately

70 classes, which have been set up to serve the internal customers
of Staatsolie. Depending on their responsibility, the authorized
customers are able to pick materials from the stores from one or more
classes. For this study, Staatsolie’s existing material classes appeared
to be not very useful because they focus on internal customers and
are not classified according to commodity groups or suppliers. The
first step was to regroup the classes and classify them according to
commodity groups, with approximately the same supply risk, in
which materials can be ordered in a package and the focus is main-
tained on the buyer-suppliers relationship. The regrouping resulted
in 30 commodity groups. The regrouped classes are stock items,
but also materials relating to the annual production expansion pro-
gram are considered, given that these materials represent a major
part of the annual investments and therefore have the largest annual
profit impact for Staatsolie.
Due to the limited time frame, 40 products and=or classes were
selected for this study. To show both stock items as well as items from
the annual production expansion program in the matrix, it was
decided to take 20 items from the list of commodity groups with
the highest turnover and 20 items from the production expansion
program with highest profit impact. Each of the commodity groups
represents a large amount of materials, so a second filter was applied
to the selected 20 classes by taking three items per class with the high-
est turnover value. Four items in the selected commodity groups were
separated from their class, as these had a different supply risk or
could not be ordered at a single supplier. The overall result is a list
of 44 classes and=or items for investigation.

State Oil Company of Suriname: The Case Company

Staatsolie Maatschappij Suriname NV, State Oil Company of
Suriname, was founded on December 13, 1980, as a company with
limited liability under Surinamese Law with the right to explore
and produce hydrocarbons in Suriname. The Republic of Suriname
owns all shares. Initially, Staatsolie was merely meant to be an advis-
ory body on behalf of the government, with the principal task of
monitoring the activities of oil companies’ petroleum activities in
Suriname. However, by taking the development of onshore dis-
coveries into its own hands, an integrated petroleum company was
86 JOURNAL OF TRANSNATIONAL MANAGEMENT

created that currently employs 640 people. With an estimated

turnover for 2006 of more than 250 million U. S. dollars, Staatsolie
is a sizeable generator of foreign currency in Suriname. Staatsolie’s
petroleum operations are concentrated on onshore Suriname. The
company’s crude production amounts to 13,000 barrels per day and
its remaining recoverable reserves amount to 110 million barrels
(MMBLS). The value of purchased products is 117 million U. S. dol-
lars. The company buys from approximately 700 local suppliers and
300 foreign suppliers. The Procurement Division processes annually
about 8,000 purchase orders. More than 90% of the goods must be
procured from abroad, primarily from the United States, where Staat-
solie has two purchasing agents. Staatsolie faces limited schedules for
ocean freight and airfreight from the United States to Suriname. Very
often, due to a limited amount of freight, there is no direct shipment to
Suriname, but the freight is diverted to the island nation of Trinidad
and Tobago where transshipment in smaller Suriname-bound vessels
takes place. This has an impact on the lead-times and the inventory
levels. Staatsolie tries to anticipate the annual hurricane season in
the Caribbean and North America, which tends to disrupt sea freight
to Suriname, by increasing the inventory levels and by having materi-
als for its investment program in house before the start of the season.
Another aspect that the company faces is the frequency of labor
strikes at customs. These variables result in higher supply risks for
the company and require much effort from the Procurement Division
to meet the internal customers’ requirements for on-time delivery.

RESULTS
After classification and discussion, the profit impact and supply
risk for all collected items or classes was determined and filled in
the matrix. Using a linear scale would mean that more than 85%
of the items are positioned in the lower section of the matrix. Plotting
the results with the data of the profit impact dimension on a logarith-
mic scale gives a much better distribution of the items (see Figure 2).
On a logarithmic scale, the limit for a low profit impact ends at
US$ 100.000. This is a more acceptable value, since the company is
using within the framework of its ISO 9001:2000 certification a value
above US$ 100.000 as medium to high impact on its operations.
Within the logarithmic profit impact axis, 24 items are positioned
 Cees J. Gelderman and Dennis R. Mac Donald 87

FIGURE 2. Staatsolie’s Portfolio Matrix: Clusters

in the leverage and strategic quadrants and the other 20 items

within the noncritical and bottleneck quadrants. By observing the
actual position of the products in the matrix in Figure 2 it can be
concluded that there are three clusters of items. The first cluster is
found in the noncritical quadrant and consists of items with a low
profit impact and very low supply risk. The supply risk here is very
low, because of the large number of suppliers and=or alternative
products. Without a good purchasing strategy, the high number of
low-value items can increase the company’s purchasing costs.
The second cluster is found in the leverage quadrant and consists
of items with a high profit impact and a medium supply risk. Almost
all items are positioned in the right section, implying that for most
items in this section the company still faces certain problems with
the supply, resulting from the remote conditions in which the
company operates. Special attention should be given to the logistics
in this quadrant. Finally, the third cluster is found in the strategic
quadrant and consists of items with medium to high profit impacts
and an extreme supply risk.
Another way to read the matrix is to look at the total value of the
items in each quadrant. The strategic quadrant, with 32% of the
items, represents the biggest profit impact, namely US$ 8,565,000
or 72% of the total profit impact of the matrix.
The conclusion is that the company is facing a very high supply
risk with the biggest part of its profit depending on a limited amount
88 JOURNAL OF TRANSNATIONAL MANAGEMENT

of suppliers. The 14 items in the strategic quadrant can place the

company in a difficult negotiating position if the company’s strength
is low compared to the supplier’s strength, especially when focusing
on the field in which the company operates with an increase in
demand on products related to the oil industry. As a relatively small
company it is therefore necessary to decrease the number of strategic
items and move to the leverage quadrant.
In the portfolio matrix, 14 items are positioned in the strategic
quadrant. In four cases reducing the supply risk is hardly possible
and a strategic partnership can contribute to the competitive advan-
tage. A single supplier delivers the drive heads and the lead-time is
approximately six months. The tubing anchors are custom-made by
only one supplier with a lead time of three months, whereas the
market conditions for chemicals are fair but supplied by only two
suppliers. The logistics for these chemicals are very complicated,
because strict U. S. customs regulations for chemicals make delays
difficult to predict. It is therefore necessary to have a good logistics
management system with the supplier in place to monitor the flow
of this product. A close relationship with the purchasing agent in this
process can also lead to a reduced supply risk.
By qualifying other suppliers and=or changing some specifications,
six items can move to the leverage quadrant. With respect to fill sand
and shell sand the company already has started a process to identify
new suppliers and have a tender among them. It is expected that this
will lead to a considerable reduction in the supply risk and also
reduce the profit impact. For casings and tubing the company must
consider changing to other, more common, dimensions. In the case
of safety shoes, although substitutes are available, the company’s
standard brand had encountered bad market conditions. The com-
pany was therefore required to change to another brand, which will
immediately lead to a reduced supply risk. In the actual situation,
the supply risk of safety shoes is slightly improved by the involvement
of the purchasing agent. The market conditions for the Amka cables
are bad because of a high demand. These cables are procured from
Europe with a very limited freight schedule to Suriname. Looking
for other suppliers and=or alternatives can improve the position in
the matrix considerably.
The leverage quadrant is the most favorable position in the matrix
because of the number of suppliers and the good market conditions.
The strategy is to bargain for the best deal and switch between
 Cees J. Gelderman and Dennis R. Mac Donald 89

suppliers if a better deal can be achieved. The supply risk of most of

the products in this quadrant can be lowered by changing the
specification of the products to meet the development in the industry.
The main strategy for noncritical products is to pool and to standar-
dize. Some items can be pooled and placed in supply agreements
to improve the efficiency of the purchasing process. Where possible,
the company must consider modifying the specifications to meet
specific standards, increasing the buying volume, and improving the
purchasing power. Another strategy to decrease the purchasing cost
is to use a low value order process and then increase the stock level
for products that must be imported.
Bottleneck items cause numerous problems and risks. Stock levels
should be increased for bottleneck products with a very low profit
impact, such as nitrogen and boiler parts. If possible, the items should
be moved to the noncritical quadrant where the supply risk is much
lower. If there are products in the top section of this quadrant, it is
advisable to have an agreement with the supplier to secure deliveries.
When the previously mentioned strategies are applied, the
improved matrix will show a higher concentration of items in the
leverage quadrant. Because of the high number and value of items
in the leverage quadrant, the company will have a much better nego-
tiating position with the supplier. About 77% of its profit impact can
be tendered among selected suppliers that will result in competitive
prices and better delivery conditions. Table 2 depicts the actual and
the expected distributions of the items in the matrix.
The project team is convinced that implementing the proposed
strategic actions will significantly contribute to the competitive posi-
tion and the purchasing performance of the company. The team
concluded that the introduction of a purchasing portfolio approach

TABLE 2. Items in the Matrix Before and After Imple-

mentation of Strategic Recommendations

Quadrant Items % Items %

before after

bottleneck 3 7 2 5
noncritical 17 39 15 34
leverage 10 22 19 43
strategic 14 32 8 18
total 44 100 44 100
90 JOURNAL OF TRANSNATIONAL MANAGEMENT

is very useful. It helped to get a better understanding and more

insight into purchasing opportunities in general and logistical issues
in particular.

CONCLUSIONS AND RECOMMENDATIONS

Purchasing portfolio models, including Kraljic’s, have been
developed from the point of view of a well-developed industrialized
logistics infrastructure. Many countries, especially less developed
countries, are facing an undeveloped logistics infrastructure that
has a major negative impact on their supply risk. This study was
aimed at investigating the possibilities of the Kraljic matrix in an
undeveloped logistics infrastructure. The literature study resulted in
an adapted Kraljic matrix, primarily including major logistics
constraints and additional purchasing strategies. In remote areas,
the following factors have an impact on the supply risk dimension:
on-time delivery; cultural differences; lack of logistical knowledge;
supply interruptions due to strikes and hurricanes; duty and custom
regulations; payment conditions; and logistically related facilities.
The use of purchasing agents and the use of an integrated logistics
management system between buyer and supplier are two additional
strategies formulated for remote environments.
The model was used and tested by active research executed at the
State Oil Company of Suriname. This case study revealed some new
insights in the use of the purchasing portfolio approach for remote
areas in an undeveloped logistics infrastructure.
Staatsolie will significantly improve its purchasing portfolio by
implementing the differentiated purchasing strategies for remote
environments. The following improvements can be achieved:

. A design change can decrease the supply risk of some bottleneck

items.
. Pooling noncritical items and the use of supply agreements will
reduce the number of suppliers and the purchasing costs.
. Implementation of desired strategies for the strategic items
will cause some of these items to shift from the strategic to the
leverage quadrant, thus improving Staatsolie’s negotiating posi-
tion. This will also reduce the supply risk and the dependency on
suppliers.
 Cees J. Gelderman and Dennis R. Mac Donald 91

. An increased volume of items in the leverage quadrant will result in

more buying power for Staatsolie. With more buying power better
agreements can be made, resulting in lower costs.
. The reduced supply risk will protect Staatsolie against disastrous
supply interruptions and unplanned shutdowns of its operations.
. The improved negotiating position, especially for the items moved
toward the leverage quadrant, will enable Staatsolie to reduce
purchasing costs and have competitive bids that will finally reduce
its profit impact.

The adapted matrix seems to be a very useful tool for companies

operating in an environment with an undeveloped logistics infrastruc-
ture. The adapted Kraljic approach is suited for the development of
differentiated purchasing strategies, especially the two strategies for
remote environments, which allows companies to reduce their supply
risk and to improve their purchasing results.
To gain deeper understanding of this topic, it is recommended to
expand the research on logistics management in remote environ-
ments, because, compared to advanced nations, there is a significant
lack of literature for those environments. The results from further
research can be used to better define the supply risk for the remote
environments and the impact on the Kraljic matrix.

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SUBMITTED: July 2007

REVISED: August 2007
ACCEPTED: November 2007

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