Leprechaun Shoes (LS), to the uninitiated would appear to be a successful company who have carved out a particular niche in their business . Suppliers of high quality footwear, over 100 years old, Irish owned, constant annual sales and a recognition from buyers that a high price is worth paying for a brand that they have great faith in. Upon closer examination there are issues facing Leprechaun Shoes that give rise to great concern. The most obvious issue is that although annual sales are constant, in real terms this represents a serious decline in business. In an effort to identify and hopefully rectify the under-lying issues the board has appointed a new member. James Lovatt, although continuing the tradition of board members being descendents of the founders of LS, holds a Masters Degree in Business Administration and vitally has worked elsewhere in both manufacturing and distribution.
Having tasked himself with undertaking a root and branch review and analysis of LS with the goal of identifying the most important issues facing LS, James has come to the conclusion that the seven issues he has identified are rooted in Commercial Relationships problems. He feels that with the application of some Supply Chain thinking, LS can resolve these issues and return to focussing its attention on maintaining its strong brand and its niche in the market. Below, we will take the problems James has identified, expand them and apply the Supply Chain thinking, in the form of a purchasing portfolio analysis tool devised by Peter Kraljic.
The Kraljic Matrix
The Kraljic Matrix from Peter Kraljic was first described in an article "Purchasing must become Supply Management" in the Harvard Business Review (Sep-Oct 1983). The Kraljic Model can be used to analyze the purchasing portfolio of a firm. The matrix can be particularly useful when a firm is trying to develop a supply chain strategy. It is an analysis tool which maps out the...