Sourcing Portfolio Analysis: Power Positioning Tools for Category Management & Strategic Sourcing

Citation

Martin D. Murphy (2015), "Sourcing Portfolio Analysis: Power Positioning Tools for Category Management & Strategic Sourcing", Strategic Outsourcing: An International Journal, Vol. 8 No. 2/3, pp. 284-286. https://doi.org/10.1108/SO-10-2015-0025

Andrew Cox in “Sourcing Portfolio Analysis” provides a comprehensive analysis of his own perspective of the role of “power positioning” and how this defines and impacts “Category Management” and “Strategic Sourcing”. Professor Cox as a leading academic since the early 1990s is a prolific publisher on this subject, and his books all merit serious consideration. “After many years of challenging orthodox views” about procurement and supply chain management practice, the book presents nothing particularly new and has the potential to disorientate the average purchasing or supply chain professional. Many of the really interesting and useful points are undermined by suggestions in the initial critique that Kraljic’s and Porter’s Five Forces model both lack rigour and/or are sub-optimal approaches and tools. Cox’s subsequent interpretation, development and refinement and grudging acknowledgement of both models prove just how robust and useful these cornerstones of procurement strategy development and operation actually have been and still are and the influence they have had on the understanding and development of supply chain management to businesses and organisations. I recently attended a presentation by an ex Royal Marine who told the executives and managers present that “no plan survives contact with the enemy”, and I wonder just how robust and useful the endless list of tactical approaches and re-positioning, ranging across a spectrum from Kraljik’s sub-optimal four “boxes”, which may be too few, to a purchasing chessboard with 64 positions to IIAPS’ “power positioning inspired” dynamic model, are when applied practically from a powerful or weak position.

Cox acknowledges most of the wider challenges to Kraljic and Porter are refinements. All progress is made by unreasonable men, but the analysis only presents another comprehensive discussion and falls into the same category of further refinements.

The book is thorough and comprehensive and presents a structured but less well-presented approach with useful models and discussions but limited references or other perspectives, 50 per cent of the bibliography include other publications by Cox. The “power positioning” concept is real, and Cox et al. ' s (2008) work on “channel captains” (dominant buyers) in UK food supply chains reveals much about this approach and its utility. At this time, four or five UK supermarkets enjoying over 90 per cent of market share were the only route to market for suppliers. In 2015, this dominant buyer model seems less successful, as the still big and previously totally dominant supermarkets are challenged by changing markets, more demanding and price-conscious customers and new market entrants. The reality of channel captains in this sector is that they were not buying at all. They were actually selling space in their stores and in terms of any significant volume, the only route to market for suppliers. Absolute power corrupts absolutely, and in 2013, the UK Government appointed a Groceries Code Adjudicator or “Supermarket Enforcer”, recommended by the Competition Commission in 2008, who can fine customers who bully suppliers and fix prices. The British Retail Consortium, representing the buyers, objected strongly to the role, as it was “weighted heavily against the supermarkets”. Perhaps due to a reported climate of fear, 80 per cent of only 400 suppliers out of 8,000 direct suppliers who replied to the Adjudicator’s survey identified a Code violation. The number who actually reported a code violation to the Adjudicator is not clear.

If power equals fear, then it works in the supermarket sector, but it does not sound very sustainable and what about corporate social responsibility issues, never mind social, economic and environmental issues, which most sourcing strategies now routinely consider. The book is silent on these issues.

It is not obvious from Cox’s analysis how static and dynamic leverage deals with structural changes in markets and the impact this has on “power positioning”. In that respect, the analysis reinforces rather than challenges the orthodoxy but takes little or no account of “new” economy business models and technology where value is the more important driver and in an outsourced economy, how power is redistributed in networks but of course still needs to be accounted for and managed. There is no one way and understanding the portfolio is essential. Cox is absolutely correct on the significance and importance of this and adapting to support circumstances and different dynamics, but this is where the bigger questions remain unanswered. The practical reality for most professionals is that they do not necessarily have the choice or options available that are suggested. Self-generated circumstances or otherwise will determine whether you are dependent or dominant. A good professional understands that how they behave and manage that relationship will determine its success and longevity, and whether this “cooperation” is best practice is a moot point. The idea presented that Kraljic’s approach has “led the Procurement profession down a cost reduction tactical dead end” underestimates the profession and the significance of contemporary sourcing and procurement for high-performing businesses and organisations.

The book loses its way in the middle chapters with over-complicated analysis and petty point scoring. However, the final Chapter 6, which is unfortunately one of the shortest, recovers well. “Decision Rules” presents a practical five-phase model that explains better than earlier chapters how “power positioning” can be applied but “does not provide an answer”, only a logical process that can be adapted to suit specific circumstances. The earlier middle chapters suggest you can anticipate every eventuality that could continue ad infinitum but then more importantly need a solution to manage that scenario. Most supply chain professionals usually know what to do and are better educated and more importantly informed than ever before. What they usually lack are models and tools that they can use in a practical context. The final chapter goes some way to addressing this missing link.

I am left disappointed that the initial challenge that the book presents does not deliver anything different or better but only serves to reinforce how robust the conventional approaches are and as a practitioner how simpler is better. The notion that a practitioner is able to develop a practical approach refined to the suggested levels of detail is interesting, but this becomes a diminishing return once the fundamentals are understood; however, the devil is in the detail. In practical terms, this might be closer to Kraljik’s end of the scale than the suggested “power positioning” derived approach. For academics, the analysis and level of detail provide a rich source of material and information for probably further refinement.

Cox remains a dominant and influential academic force. The book is academic and focused on an institutional and professional development audience. Buy it, read it, but I wonder how many practitioners would make any changes to what they do or derive any practical benefit by refining their approach or moving from one of 64 boxes to another. This is more like snakes and ladders than chess.

In the meantime, Kraljic’s 1983 article “Purchasing must become Supply Chain Management” and Porter’s model, like democracy, are the worst approaches we have until you look at all the others.

Reviewed by Martin Murphy.

Martin has 30 years supply chain experience and has worked as a consultant in supply chain, procurement, contract management and logistics for over 20 years. This includes an extensive range of private and public sector clients in the UK and worldwide working on buy-and-sell side projects, including sectors ranging from automotive and oil and gas to banks as well as central and local government. He is the Managing Director of SCMG, a management consultancy firm, and an Industry Advisor to SOIJ.