hi there my name is Julian throme and I'd like to tell you something about the purchasing strategy cube now what is a purchasing strategy cube well it's a it's a real cube as something I developed last year and it contains a lot of my experiences during the last 25 years as a purchasing director and supply chain director for various Dutch companies the purchasing strategy cube is a thought model and it's used to buy stuff so basically if you're a professional buyer if you're chief purchasing officer if your purchasing manager you can use the cube to think on how you will buy your stuff and how you will approach your suppliers now let me start with the basics those of you who are active in purchasing management may recognize this this is the project matrix you may remember mr. crolick former McKinsey consultant developed this he actually identified two axises one is the financial impact axis it's the one which is vertical and it represents the value of the products or services which are being bought then there's the horizontal axis it represents the supply risk of obtaining these products or services so basically if the supply risk is high that means for instance that there is a monopoly the products are not abundant if the supply risk is low you can get these these products everywhere and there may be even in excess of the product so then maybe also a lot of suppliers where you can get the stuff from now you'll notice four colors where's one is the blue one the routine items items are obviously products or services so routine items are characterized by the low supply risk and the low financial impact right so let's say the value of the product is low compared like for instance a pack of milk right so the value of the product compared to a for instance a television set is relatively low right television set obviously is more represents more more for more money now so the routine items next to the routine items you'll find the bottleneck items so these are characterized by a high supply risk and still by the same low financial impact now think here of for instance something which is cheap it can be a nut or a bolt or screw but if for instance the soda it can be relatively cheap but it can be that if you don't have that bolt that your old factory comes to a standstill right so you got to think that over that's called a bottleneck item then we go to the green one it says leverage items right now leverage items obviously represent a higher value and in this case there are still low in from the supply risk point of view and then there is the red pink square says strategic items so this represents a high value product or service service with a high supply risk so there may be just one supplier of this product or service okay now if we if I go to the back side of the queue we'll find different strategies it's called the purchasing strategy cube we will find different strategies representing what we should do for instance in the case of a routine item or a leverage item and so forth so let's stick now to the routine if I go to the back side you'll see that the root team item can best be tackled by focusing on the processing with your supplier the it so that says efficient processing yeah now there are different ways of doing that so how can you do that now we introduced a third axis we added this to the chronic metric matrix and the third axis says supplier dominance all right now you'll see notice here that supplier dominance there is we have the blue ones here and we have this time we have a couple blooms as well so there are four different ways in which we can come to that strategy alright so I just mentioned the strategy of efficient processing now there are different ways we call in the in the in the world of supply chain management we have the so called vm i that's called vendor managed inventory that means setting up making sure that your suppliers manage your stocks as a customer obviously this displaces some of the costs throughout the supply chain and means that your supplier may have to do some investments maybe put some extra people on the payroll to manage your stocks as a client and obviously that has to be taken into account while you're negotiating with that with that supplier on the other hand there is something else it's a CPF r that means collaborative planning forecasting replenishment I'll talk to that about in the next video to look at this end you'll see electronic data interchange and the most simple way of handling this is through setting up some consignment stock as I just mentioned now if I go for instance to a leveraged item the leveraged items right so say I identified the product of service is the leveraged item so how do I go about with the leveraged item the back side of the cube says exploit power so how do you exploit power then again I go to the the other side the side of the cube and it gives me different solutions on exploiting power so it may be that that I set up an option right so they're websites you can set up options and so forth and basically what you try to achieve there is that various suppliers for the same product of service say going to fight with each other because they all obviously are looking for your for your favors now that does not work if a supplier is dominant in the market and we've see that a lot the couple of Lasky last years where there's a lot of mergers and acquisitions going on also on the supply side so in this case you have to actually go into the market and actually organize what we call it tender in this case it's a tender 2.0 and in the tender is different to an option how a tender is is actually a dialogue between suppliers and their potential customers and in that dialogue basically it's an open dialogue it's an equal level dialogue and basically suppliers are given the opportunity to to actually add value to show how they can add value to their clients and I'll tell you about that in a next video thanks for watching