Exploring the adoption of Kraljic’s Portfolio Model in the upstream oil and gas company : a case study of an upstream multinational oil and gas company operating in Southeast Asia
Abstract
Oil and gas companies are involved in complex and challenging operations due to the
circumstances faced in the environment where oil and gas companies operate. In this industry,
companies rely heavily on their suppliers to execute their operational activities. However,
many researchers have criticised the sourcing and supplier relationship management approach
adopted in the industry as being weak, inefficient, and lacking a structured methodology to
derive value-add for the companies. Therefore, for oil and gas companies to be competitive in
the marketplace, it is imperative to adopt appropriate Procurement strategies required to deal
with suppliers in the entire supply chain system to reduce cost and improve resilience to
weather the constant market volatility of the oil price fluctuation. These strategies should be
tailored to match the required criticality of the goods and services.
This study aimed primarily at exploring the adoption and/or adaptation of Kraljic’s (1983)
Purchasing Portfolio Model (KPM) in the procurement process to determine how this tool can
be leveraged to devise procurement strategies to support the Oil Company within the oil and
gas industry context. A case study methodology was adopted for this research by considering
an oil and gas company operating in Southeast Asia (which opted to remain anonymous and is
named in this study as an Oil Company). Primary data was collected via semi-structured
interviews with six participants involved in the decision-making for the supplier selection and
relationship management process. A qualitative thematic analysis technique was adopted to
analyse the data.
The analysis outcome strongly evidenced that although Kraljic’s model has been prevalent in
other industries and also adopted in the oil and gas sector, however, to be effective, this tool
will require some adaptation. Furthermore, the study identified that the lack of detailed
sourcing guidelines was the most predominant from the weaknesses identified with KPM.
Therefore, this gap led to the development of a Guideline with a simplified step-by-step
Sourcing Guide based on KPM. The Guideline should aid practitioners of the case study
company and other oil and gas companies in developing strategies that can reduce cost and
supply chain risks.