Portfolio approaches to procurement - Analysing the missing link to specifications

Portfolio models have been used in strategic planning and marketing, but th eir application to the field of purchasing has been limited. This seems, ho wever, to be changing, as procurement management has become more strategic. Applying portfolio models to purchasing can introduce a major risk in that the implications for suppliers and/or operational staff are scarcely consi dered. This article explores existing portfolio models in purchasing, which classify purchases into different product categories. Based on case studie s of two automotive OEMs and two vehicle industry suppliers (all European), together with benchmarking interviews at Toyota, Japan, we attempt, firstl y, to link these product categories to different types of suppliers and, se condly, to link the product categories and the supplier types to the specif ication process-in other words, to link the specification types and the spe cification generators. We argue that product categories must be matched by distinctive suppliers that have the required capabilities and capacities to satisfy specific product demands. The connection between the portfolio mod els and the specification process will help original equipment manufacturer s (OEMs) and suppliers to improve relations with each other. (C) 2000 Elsev ier Science Ltd. All rights reserved.