European Journal of Purchasing & Supply Management 8 (2002) 35–42

Why relationships do not fit into purchasing portfolio modelsFa

comparison between the portfolio and industrial network approaches
Anna Duboisa,*, Ann-Charlott Pedersenb
a
Department of Industrial Marketing, Chalmers University of Technology, S-412 96 Gothenburg, Sweden
b
Department of Industrial Economics and Technology Management, Norwegian University of Science and Technology, N-7491 Trondheim, Norway

Abstract

Purchasing portfolio models have received a great deal of attention during the last two decades. The simplicity of application and
the focus on power-dependence balancing has been appreciated by practitioners and academics alike. In this paper we argue that
using ‘given’ products as a port of departure, in addition to a dyadic perspective on purchasing management, may be
counterproductive where purchasing efficiency is concerned. First, the object of exchange is not ‘given’ when firms interact, but may
be subject to continuous joint development. Second, the dyadic perspective may obscure potentials for enhancing productivity and
innovativeness since both parties have other relationships that impact on the collaboration between them. r 2002 Elsevier Science
Ltd. All rights reserved.

Keywords: Purchasing management; Portfolio models; Industrial networks

1. Introduction the need to purchase in different ways, is also increasing,

which confronts firms with new challenges.
In recent decades, purchasing costs have risen. In 1983, the Harvard Business Review published
Currently, purchasing costs constitute the majority of an article by Peter Kraljic entitled Purchasing must
the total cost of goods sold in both the private and become supply management. In essence, the article
public sectors (Gadde and Ha( kansson, 2001). In many focused on purchasing as an important managerial area
firms, the value of purchased materials, components, with a huge impact on profit. The article received a great
and systems accounts for 50–80% of the total cost of deal of attention both from managers and academics,
goods sold (Cammish and Keough, 1991, p. 23; Van and is still applied in practice and used as a reference
Weele, 2000, p. 17–18). Thus, the purchasing function by researchers in industrial purchasing. There are
has a substantial impact on the total cost of a firm and several reasons for this. First, article recognised
thereby on the potential profit. This change has been purchasing as an important management issue, and
accompanied by increasing attention to purchasing, as a thereby an area regarded as in need of useful models.
field of strategic interest, both from managers and Second, it distinguished clearly between different
researchers. purchasing situations and gave logical recommenda-
Suppliers have also become increasingly important as tions as to how to act. In later years, a number of
they account for a large part of the value creation academics, referring to Kraljic’s article, have further
related to the buying firm’s products and services (as an developed his model of differentiated purchasing
effect of increasing specialisation). Thus, managing the behaviour in relation to: (1) single materials or
firm’s supplier base is becoming an essential strategic components; or (2) supply or purchasing situations
purchasing issue, and consequently the need for (for example, Van Stekelenborg and Kornelius, 1994;
differentiated approaches to purchasing behaviour Olsen and Ellram, 1997). Following these elaborations
increases. The variety in purchasing needs, and thus of Kraljic’s model, another line of development can be
observed. This second wave focuses on classifying the
*Corresponding author. Tel: +46-31-772-11-96. content of buyer–supplier relationships as opposed to
E-mail addresses: [email protected] (A. Dubois), pederse- the initial focus set by Kraljic (e.g. Bensaou, 1999;
[email protected] (A.-C. Pedersen). Gelderman and Van Weele, 2000).

0969-7012/02/$ - see front matter r 2002 Elsevier Science Ltd. All rights reserved.
PII: S 0 9 6 9 - 7 0 1 2 ( 0 1 ) 0 0 0 1 4 - 4
36 A. Dubois, A.-C. Pedersen / European Journal of Purchasing & Supply Management 8 (2002) 35–42

Parallel to these developments, interest in, and 2. Purchasing portfolio models

empirical studies of, relationships between buyers
and suppliers in industrial markets have grown Kraljic (1983) was the first to bring portfolio models
enormously since Kraljic’s article was published. These into the purchasing area: ‘‘The Kraljic portfolio
studies show that industrial markets can be charac- approach is generally considered as an important
terised by the existence of long-term business relation- breakthrough in the development of theory in the field
ships, and that these relationships are both complex of purchasing and supply management’’. (Gelderman
and varying with regard to content and dynamic aspects. and Van Weele, 2000, p. 291). The portfolio model
With this as a starting point, several concepts and concept was originally developed by Markowitz (1952),
frameworks have been developed which have contrib- who used it as an instrument for managing equity
uted significantly to our understanding of: (1) the investments. His point of departure was that rational
interactive nature of customer–supplier relationships, investors will (or should) select portfolios which max-
seen from a purchasing point of view (for example, imise the individual investor’s utilities by maximising the
Lamming, 1993, 1996; Araujo et al., 1999; Gadde and expected return for a given level of risk, or minimising
Snehota, 2000; Gadde and Ha( kansson, 2001), and (2) the risk for a given level of expected return. According
different characteristics of business relationships and to Turnbull (1990, p. 8) the portfolio concept has been
networks (e.g. Ha( kansson, 1982; Ring and van de Ven, recognised as having viable applicability in other fields,
1992; Kanter, 1994; Ha( kansson and Snehota, 1995; such as purchasing and marketing.
.
Moller and Wilson, 1995). Furthermore, we can observe Kraljic’s model is based on two dimensions for
a development from studies of dyadic buyer–supplier classifying a firm’s purchased materials or components
relationships to studies focusing on single business (see Fig. 1):
relationships in the context of the other relationships
(1) ‘‘the strategic importance of purchasing in terms
in which the firms are involved (Blankenburg and
of the value added by product line, the percentage
Johanson, 1992; Anderson et al., 1994; Holmen and
of raw materials in total costs and their impact on
Pedersen, 2000). In addition to characterising individual
profitability’’
relationships, empirical studies show that single rela-
(2) ‘‘the complexity of the supply market gauged by
tionships are also affected by developments in other
supply scarcity, pace of technology and/or materi-
relationships. Thus, any business relationship exists
als substitution, entry barriers, logistics cost or
both in itself and is at the same time embedded in a
complexity, and monopoly or oligopoly condi-
network context, and thus closely related to other
tions’’ (Kraljic, 1983, p. 110).
relationships.
The aim of this paper is to scrutinise the purchasing While previous literature mainly paid attention to
portfolio models in terms of their basic assumptions internal purchasing aspects, Kraljic’s model aims at
and implications. By contrasting these models with matching external resources provided by suppliers with
the industrial network approach (for example, the internal needs of the buying firm, by using one
Ha( kansson and Snehota, 1995; Ford et al., 1998) some internal and one external dimension. The issue at hand
issues concerned with the principles of analysing is thus to optimise the way in which suppliers are
purchasing situations are highlighted. Thus, the paper .
managed. In the words of Nellore and Soderquist (2000,
focuses on how relationships between buyers p. 264): ‘‘ythe objective of the portfolio modelsFto
and suppliers are dealt with in these two different optimise the use of capabilities of different suppli-
settings and discusses the implications of the various ersFmust be kept in mind’’. The optimisation is based
assumptions about the context in which purchasing
takes place.
The second section presents an overview of the High
Leverage items: Strategic items:
different purchasing portfolio models, on the basis of Materials Supply
the model developed by Kraljic (1983). The classification management management
dimensions used in the models are analysed and the Importance
portfolio approach in terms of suggested steps is of purchasing
discussed, together with its implications. Thereafter, Non-critical items: Bottleneck items:
we introduce the industrial network approach and Purchasing Sourcing
management management
discuss the consequences of this approach in terms of
interdependencies between relationships and products as Low
‘network entities’. The paper concludes with a discus- Complexity of
Low High
sion on essential differences between the purchasing supply market
portfolio approach and the industrial network ap- Fig. 1. The Kraljic purchasing portfolio model (modified from Kraljic,
proach. 1983, p. 111).
 A. Dubois, A.-C. Pedersen / European Journal of Purchasing & Supply Management 8 (2002) 35–42 37

on the trade-off between the costs of obtaining the dence argument, most of the reviewed articles (see Table
products on the one hand and the value achieved from 1) also introduce an action plan to manage suppliers
obtaining them on the other. Turnbull (1990, p. 7) also and/or supplier relationships, given the different cate-
emphasises optimisation based on the limited resources gories in the purchasing portfolio models. In purchasing
of the buying firm: ‘‘ythe portfolio concept is a useful situations scoring high in both dimensions, thus imply-
management tool for enforcing a discipline in the ing mutual dependence, Kraljic (1983) and Bensaou
allocation of the company’s limited resources to an (1999) suggest (strategic) ‘partnerships’, Olsen and
optimal combination of business operations which will Ellram (1997) ‘strengthened relationships’, and Gelder-
maximise long-term returns at the given levels of risk’’. man and Van Weele (2000) ‘balanced relationships’.
A brief review of some of the latest purchasing In our view, the purchasing portfolio models,
portfolio models, see Table 1, gives that two additional with Kraljic’s model as the point of departure, have
models using one internal and one external dimension become popular and widespread partly because they
have been developed by Van Stekelenborg and Korne- are fairly easy to communicate and understand, and
lius (1994) and Olsen and Ellram (1997). Van Steke- partly because they give practical guidelines for how to
lenborg and Kornelius (1994, p. 49) use ‘‘the need for manage different purchasing situations, suppliers and/or
internal market demand control and the need for supplier relationships. This is also highlighted by
external supply market control’’ to discern between Gelderman and Van Weele (2001, p. 414): ‘‘Kraljic’s
four types of supply situations, whereas Olsen and purchasing portfolio seems to be an effective tool for
Ellram (1997, p. 105) use ‘‘difficulty of managing the discussing, visualizing and illustrating the possibilities of
purchasing situation and strategic importance of the differentiated purchasing and supplier strategies’’.
purchase’’ as their external and internal classification Furthermore, these models seem to handle the power-
dimensions, respectively. dependence problem in many purchasing situations by
In the models of Bensaou (1999) and Gelderman and focusing on how to exploit the firm’s purchasing power
Van Weele (2000), the classification dimensions are vis-a" -vis suppliers and reduce risk to an acceptable
somewhat different. These two models use the power- minimum. However, this way of viewing purchasing
dependence between buyer and supplier to differentiate situations and managing supplier relationships is based
between different types of relationships (or exchanges), on a particular set of assumptions about how industrial
and thereby bring into focus that the fundamental markets operate. In the following sections, we explore
assumption for their models is the power-dependence another way of describing and analysing purchasing and
argument. In our view, this is also the basis for the other supplier relationships, namely the industrial network
suggested purchasing portfolio models, although this is approach.
not explicitly stated or discussed. Gelderman and Van
Weele (2000, p. 293) comment on this: ‘‘In the [y]
Kraljic matrix it is not clear in what way the balance of 3. Interaction and networking in the industrial network
power enters the model’’. However, the absence of approach
explicit assumptions on power may not be limited to
purchasing portfolio models as Ramsey (1994) argues The industrial network approach has inter-firm
that the concept of power is almost totally absent from relationships as focal units of analysis rather than firms
current purchasing literature in general. (Ha( kansson, 1982; Axelsson and Easton, 1992).
Irrespective of whether or not dependency is explicitly Furthermore, it emphasises connections between rela-
dealt with in the purchasing portfolio models, there is a tionships and their consequent embeddedness in net-
common view on the power-dependence argument at the works of relationships (Blankenburg and Johanson,
core of the models. The reader is normatively advised to 1992; Holmen and Pedersen, 2000). Relationships have a
avoid becoming dependent on individual suppliers, for certain content based on the links between the firms’
instance by using at least two competing suppliers for activities, the ties between their resources and the bonds
.
strategic components (Nellore and Soderquist, 2000). between them as actors. Also, the relationships have
Furthermore, Kraljic (1983, p. 114) recommends ex- certain functions in relation to the individual firms
ploitation of the suppliers’ dependence whenever possi- involved, to the relationships per se and to related third
ble: ‘‘To reduce the long-term risk of dependence on a parties (Ha( kansson and Snehota, 1995).
single source, [y] the company should also search for Understanding and modelling buyer–supplier rela-
alternative suppliers or materials or even consider tionships using the industrial network approach differs
backward integration to permit in-house production. from the use of purchasing portfolio approaches.
On the other hand, if the company is stronger than the Relationships are not regarded as isolated dyads and
suppliers, it can spread volume over several suppliers, thus their impact is always related to other, connected,
exploit price advantages, increase spot purchases, and relationships. This also implies that the time dimension
reduce inventory levels’’. Following the power-depen- is of importance since industrial purchases are often
38 A. Dubois, A.-C. Pedersen / European Journal of Purchasing & Supply Management 8 (2002) 35–42

Table 1
A literature review of purchasing portfolio models

Portfolio modelsa Classification dimensions Categories Action plans Phases in developing a

supply strategy

Kraljic (1983) Importance of purchasingb Materials/components Exploit 1. Classification

Complexity of supply Non-critical itemsc Balance 2. Market analysis
market Leverage items Diversify 3. Strategic positioning
Bottleneck items 4. Action plans
Strategic items

Van Stekelenborg and Control need of the internal Supply situations Purchasing as effort 1. Classify supply situation
Kornelius (1994) market demand Plain supply situation manager 2. Determine purchasing
Control need of the external Internally problematic Purchasing as demand activities
supply market supply situation manger
Externally problematic Purchasing as supply
supply situation manager
Complicated supply situation Purchasing as integrative
manager

Olsen and Ellram Difficulty of managing the Purchases Strengthen the relationship 1. Analysis of the
(1997) purchase situation Non-critical Improve the supplier company’s purchases
Strategic importance of the Bottleneck attractiveness/the 2. Analyse the supplier
purchase Leverage performance of the relationships
Strategic relationship 3. Develop action plans
Reduce the resources
allocated to the
relationship

Bensaou (1999) Buyer’s specific Relationships 1. Classify relationships

investments Market exchange 2. Identify contextual
Supplier’s specific Captive buyer profiles
investments Captive supplier 3. Design management
Strategic partnership profiles

Gelderman and Supplier’s dependence Supply strategies

Van Weele (2000) Buyer’s dependence Efficient processing
Exploit power
Volume insurance
Balanced relationship
a
The review is organised with Kraljic (1983) as the point of departure.
b
’Importance of purchasing’ is represented at the vertical axis and ‘Complexity of supply market’ is represented at the horizontal axis. This is
similar for all the classification dimensions in this column.
c
The four categories result from the combination of high–low on the two classification dimensions: non-critical items (low importance of
purchasing and low complexity of supply market), leverage items (high importance of purchasing and low complexity of supply market), bottleneck
items (low importance of purchasing and high complexity of supply market) and strategic items (high importance of purchasing and high complexity
of supply market). This is similar for all the categories in this column.

recurrent and thus individual purchasing situations trial network approach and approaches underlying
cannot be dealt with as isolated from previous or purchasing portfolio models.
anticipated future ones. Moreover, relationships are
considered both as means and ends, owing to their 3.1. Connected relationships
interactive nature. That is, relationships are considered
organising ‘living’ units that may evolve over time, Relationships enable interacting firms to economise
changing in content and function. on their networks. This implies the possibility of
In the next section the reasons for, and consequences creating and capturing connections among relationships
of, connections between relationships are examined. It is in different ways: ‘‘yif we are to understand
suggested that products subject to exchange may be seen the interactive nature of customer–supplier relationships
as ‘network entities’ rather than as isolated items. There in business markets and their dynamics, the scope
follows a discussion on differences between the indus- of analysis needs to be broadened. Each relationship
 A. Dubois, A.-C. Pedersen / European Journal of Purchasing & Supply Management 8 (2002) 35–42 39

firm
product
activity
Fig. 2. A product within an activity structure.

is dependent with a number of other relationships, and/or the ‘end product’ or any other technical system
together forming a network’’. (Gadde and Snehota, in which the products are used. Hence, the various
2000, p. 315). Below, we examine some of the most technical features of a particular product e.g. physical
important connections where purchasing is concerned. shape, strength, weight, or technical performance, tie it
First, connections between a focal buyer–supplier specifically to other products with which resource
relationship and the supplier’s other customer relation- interfaces need to be developed (Wedin, 2001; H-
ships are potential sources of economies of scale in many a( kansson and Waluszewski, 2002). Following this way
activities, e.g. production, administration and logistics. of viewing an individual product (as embedded in a user
Hence, adjustments made to capture or develop context) the relationship with the supplier depends on
similarities among particular activities directed to a what is going on in other supplier relationships. There
supplier’s various customers enable it to be cost-efficient are different ways to deal with the interdependence
and high-performing in relation to each individual between relationships resulting from the interdepen-
customer (Richardson, 1972; Dubois, 1998). It follows dence among the products subject to exchange. These
from this argument that every supplier has unique connections call for recognition of each product as being
features, attributable to its respective sets of customer embedded in wider structures. We may thus choose to
relationships, and that these are reflected in each analyse products as ‘network entities’ rather than as
supplier’s performance; that performance will be a ‘given’ objects, subject to exchange in individual buyer–
function of all its customer relationships, relative to supplier relationships.
each individual customer. The potential productivity If we focus on a product currently subject to exchange
gains resulting from connections among the supplier’s between two parties, this product can be seen as the
customer relationships are thus apparent. Less apparent, result of one activity structure as well as an input into
but of no less importance, are the abilities of suppliers to another (see Fig. 2). Recognising this context, the
contribute to increasing the value of the exchange product is part of a complex system where it is subject
stemming from how the supplier connects its customer to interdependence in several dimensions (Dubois,
relationships. The external capabilities, or resources, 1998):
that can be accessed through developing supplier
(1) any product is the result of numerous activities
relationships is always directly or indirectly a function
carried out by different firms;
of the supplier’s other relationships. This is the reason
(2) the activities engage resources that are also
we suggest that relationships are examined as units of
activated in the production of other products
(network) analysis rather than products as units
(and this joint resource utilisation is the basis for
of (dyadic) analysis where development of supplier
economies of scale);
relationships is concerned.
(3) products are interconnected since they are parts of
Second, connections between the focal buyer–supplier
different technical contexts (e.g. components in a
relationship and the customer’s other supplier relation-
technical system of some kind).
ships are important for other reasons. Here, the need
for adjustments has to do with adapting the various In addition to these two categories of connected
products subject to exchange to the user’s context. This relationships there may be a number of other relation-
may be related to the production system of the customer ships to which the focal buyer–supplier relationship is
40 A. Dubois, A.-C. Pedersen / European Journal of Purchasing & Supply Management 8 (2002) 35–42

connected. Owing to increasing specialisation and the supplier relationships or in relation to other parties in the
subsequent need for integration, the supplier’s supplier network context of the buying and the supplying firm, of
relationships and the customer’s customer relationships which the relationship is a part, are not considered.
may become of increasing importance. Connections In this section, we have tried to attract attention to the
between a focal relationship and the customer’s custo- importance of recognising interaction and networking
mer relationships can be created and captured to aspects of purchasing. By limiting the analysis to
develop values and/or reduce costs through adaptations. concern only ‘given’ products in a purely dyadic context,
Similarly, connections between the focal relationship purchasing portfolio models may obscure great poten-
and the supplier’s supplier relationships entail a further tial for increasing productivity and innovativeness. Our
extension of the external resources that can be accessed point is that this potential can only be identified through
and influenced by the customer. increasing awareness of the firm’s network and can only
be captured through successful co-operation with its
3.2. Consequences of an industrial network approach various counterparts. We argue that purchasing portfo-
lio models, by simplifying the nature and context of
Purchasing portfolio models use specified products as purchasing, fail to capture vital aspects of buyer–
points of departure for the analysis. Furthermore, these supplier relationships, both because they are based on
products are produced by suppliers and the buyer can a distinction between two dimensions, one internal and
assess and compare them with other potential suppliers’ one external, and because of the strong reliance on
products. This may seem unproblematic since most power-dependence balancing.
companies can relatively easily account for what As pointed out by other critics, there is a great risk
products they buy. However, using ‘given’ products in that the dimensions used in portfolio analysis are not
the analysis of purchasing is, in fact, problematic since accurate proxies for the many variables they are
the costs and values associated with developing, produ- .
supposed to measure (Nellore and Soderquist, 2000, p.
cing and using these products are not included in the 246). Furthermore, we argue that neither the variables
.
analysis. Nellore and Soderquist (2000) discuss the nor the dimensions are independent. When firms co-
importance of the specification process in addition to operate closely, external factors cannot be easily
previously considered portfolio dimensions: ‘‘yit is not separated from internal ones. When separating internal
enough to simply state the characteristics of the suppliers from external aspects, thus emphasising the firm
in terms of attractiveness and relationship in order to boundary, great sources of efficiency improvements are
deliver a certain component; one must designate the ignored. Torvatn (1996) illustrates how different bound-
characteristics of the supplier with regard to the aries need be considered to capture purchasing produc-
specification generator, the relationship required and tivity based on examples of adjustments made by
the type of specification required for a given component suppliers and third parties. Hence, dealing with external
.
in the portfolio dimension’’ (Nellore and Soderquist, and internal factors as independent of one another
2000, p. 264). Thus, the design of the ‘given’ product directs attention away from the fact that they are
being the object of a purchasing need, entails a number interdependent in many respects, and that these inter-
of issues that are not considered in portfolio models. dependencies may be of great importance.
Whether the product is developed by the supplier, the In purchasing portfolio models, the relative power-
customer or developed jointly by them surely impacts on dependence between the parties is assumed to be decisive
the relationship between them (Araujo et al., 1999). in regarding how gains are distributed between them.
Furthermore, the concept of interdependence between Hence the strategic advice resulting from purchasing
relationships is seldom discussed in the purchasing portfolio models is, in essence, a recommendation either
portfolio models. When this kind of interdependence is to exploit power (if the customer is in power), or avoid
brought up at all, it has to do with the costs of dealing risks associated with the supplier exercising power.
with different supplier relationships. For example, Olsen Here, we have stressed the importance of considering
and Ellram (1997, p.101) stress that: ‘‘The literature on interdependence as a result of counterpart-specific
buyer–supplier relationships tends to focus on a single adjustments that may reduce total costs and/or increase
relationship or a single type of relationship, ignoring or the value of exchanges. Furthermore, these adjustments
downplaying the important task of allocating scarce always have to be developed in consideration of other
resources between relationships’’. Hence, interdepen- related relationships.
dence between supplier relationships only concerns
resource allocation to optimise the resources spent on
managing these relationships. Furthermore, the inter- 4. Concluding discussion
dependence between the buying firm and each individual
supplier is most often concerned with specialised invest- The importance of the purchase (or exchange) and the
ments. Thus, other kinds of interdependence among complexity of the supply market are the two basic
 A. Dubois, A.-C. Pedersen / European Journal of Purchasing & Supply Management 8 (2002) 35–42 41

dimensions in portfolio models, regardless of exactly how actions. Moreover, the situations and actions become
they are labelled and conceptualised. The importance of difficult to distinguish when firms interact. For instance,
the exchange may facilitate interaction, since it can be ‘bottleneck’ situations may describe how a firm acts
assumed to increase the willingness to make counterpart- rather than the actual (structural) situation. Consider a
specific adjustments. Furthermore, the importance can firm purchasing individual commodities on a short-term
itself be assumed to be the reason for engaging in transaction basis. This firm may at times experience
interaction with the counterpart to begin with. However, difficulties in getting supplies, while another firm (in
through interaction, the parties are able to identify and need of the same product) that purchases a wide range
develop further potential that may result in increasing of products from a single supplier on a long-term basis
importance of the relationship. Ha( kansson and Snehota may be given priority. Also, when purchasing on a
(1995, p. 385) argue: ‘‘While business relationships regular basis, the second firm may go on to develop
generally start out from a first idea about ‘exchange’ plans together with the supplier. This further reduces the
the interaction process over time gives both parties the risk of ‘bottleneck’ situations developing.
opportunity to ‘bring into it’ further elements’’. The problem of analysing purchasing of ‘given’
What are then the consequences for the external products in a dyadic context is, we argue, a theoretical
dimension, i.e. the complexity of the supply market, when problem as much as a managerial one. There are surely
a relationship has been established? It may either be purchasing managers who deal with purchasing, at least
considered great (since the number of alternative to some extent, in accordance with what is prescribed by
suppliers decreases with every counterpart-specific portfolio models. This may imply one of two things, or
adjustment), or it can be said to cease to exist since both. It may reflect the role of purchasing in many firms
the parties do not handle their exchange through ‘the where the technical, logistics or other departments
market’ but instead within a relationship embedded in a absorb most of the interaction, leaving purchasing to
network (Powell, 1991). This also redirects the focus negotiate less important contracts and conditions for
from individual transactions to specific relationships. ‘given’ products. In other words, it may be a result of
The existence of interdependence between buyer and purchasing being isolated from, or rather ignored by,
supplier owing to adjustments of various kinds (e.g. other parts of the company. Or, it may be that
technical, logistical, administrative) implies that it purchasing is side-stepped because buyers prefer to deal
becomes costly to change counterpart. Several authors with purchasing as an isolated phenomenon. Again,
have dealt with this as relationship investments of an situations and actions are seldom easily separated.
economic nature and with an economic impact where Regardless of the reasons, we argue that firms dealing
the gains are of a long-term nature (Johanson and with purchasing as being a matter of ‘given’ products
Mattsson, 1985; Ha( kansson and Snehota, 1995). This supplied by independent suppliers could be able, if they
view of interdependency, as a consequence of adjust- recognised the (more complex) network structures they
ments, is very different from that which purchasing are working in, to identify and capture network
portfolio models reflect. A customer and supplier potentials and thus increase the contribution of the
making mutual counterpart-specific adjustments cannot purchasing function.
avoid interdependence, and thus both possibilities and When comparing the purchasing portfolio models and
problems take on other important aspects. the interaction and networking ways of dealing with
A focus on interaction and networking entails a purchasing we can clearly see that they imply two very
different view of (inter)dependence than is used in different approaches. Purchasing portfolio models have
purchasing portfolio models. While the latter are based been much appreciated, owing to simplicity of applica-
on power-dependence balancing issues (with the implicit tion, and because the power-dependency situations have
assumption that any power advantage will be exploited been perceived as problematic by many firms. However,
and thus be costly for the counterpart), the industrial as researchers ‘within’ the industrial network approach,
networks approach focuses instead on interdependence we suggest that redirecting the focus from products and
as an inevitable consequence of adjustments. These firms to relationships and networks entails more
adjustments, in turn, are the basis for productivity and challenging and complex analyses. These may capture
innovation for the individual firms, for the relationships, vital aspects of inter-firm interaction and interdepen-
and for the network as a whole. dence within and between relationships. Consequently,
The possibilities to adjust to and to influence others by considering products as variable ‘network entities’,
(e.g. the suppliers and their counterparts) so that they instead of as ‘given’ entities to be put into simplified
adjust, open up the ‘black boxes’ of ‘given’ parameters models, other problems and solutions may be identified.
implicit in portfolio models, and this necessitates We argue that these problems and solutions may lead
recognition of the fact that the complexity of the much further, as they are not concerned with optimisa-
situation impacts on how it needs to be analysed. Two tion, or resource allocation, but with ‘total’ cost
dimensions can never capture the possible situations and considerations and joint value creation.
42 A. Dubois, A.-C. Pedersen / European Journal of Purchasing & Supply Management 8 (2002) 35–42

Acknowledgements ships? In: Ford, D., Naud!e, P., Ritter, T., Turnbull, P.W., Leek, S.
(Eds.), Interaction, Relationships and Networks, Proceedings from
The authors would like to thank Lars-Erik Gadde, the 16th IMP Conference, Bath.
Johanson, J., Mattsson, L.-G., 1985. Marketing and market invest-
Ha( kan Ha( kansson, Elsebeth Holmen, John Ramsey, ments in industrial networks. International Journal of Research in
Tim Torvatn and Finn Wynstra for their comments and Marketing 2 (3), 185–195.
encouragement. Kanter, R.M., 1994. Collaborative advantage: the art of alliances.
Harvard Business Review, July–August, pp. 96–108.
Kraljic, P., 1983. Purchasing must become supply management.
Harvard Business Review, September–October, pp. 109–117.
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