Which of the following will you put into box 5?

The diagram displays the Kraljic Matrix, which categorises procurement items based on their profit impact and supply risk. The arrow in box 5 points from the 'Bottleneck' quadrant (low profit impact, high supply risk) to the 'Non-critical' quadrant (low profit impact, low supply risk). This movement represents a strategic action to reduce the supply risk of an item. Introducing new technology is a primary method to achieve this. For instance, new manufacturing processes (like 3D printing) or material sciences can allow a company to redesign a product, replacing a unique, high-risk component with a standardised, easily sourced one. This fundamentally reduces dependency on a limited supply base, thereby lowering supply risk and moving the item to the non-critical category.

B. forward contract: This is a financial tool to manage price volatility risk, not the underlying supply availability risk that characterises bottleneck items.
C. outsource: Outsourcing is a sourcing strategy. For a bottleneck item, it might increase dependency and risk rather than reduce it, unless it's part of a broader redesign.
D. insurance: This is a risk transference strategy that provides financial compensation for a loss but does not reduce the actual likelihood or nature of the supply disruption itself.

1. Kraljic

P. (1983). Purchasing must become supply management. Harvard Business Review

61(5)

pp. 109-117. (In his seminal article

Kraljic discusses strategies for bottleneck items which include reducing dependence through actions like searching for new materials or vendors

which is often enabled by new technology).

2. van Weele

A. J. (2018). Purchasing and Supply Chain Management. 7th ed. Cengage. (Chapter 5 on Purchasing Portfolio Management details strategies for bottleneck items

including accepting dependence and reducing it through tactics like developing alternative products or suppliers

which aligns with technological innovation).

3. CIPS (Chartered Institute of Procurement & Supply). (2018). Managing Supply Chain Risk (L5M2). Stamford

UK: Profex Publishing. (The official CIPS study guide explains that for bottleneck items

a key strategy is to reduce risk by redesigning products to use more standard components

an action often facilitated by technological advancements).