Integrating Demand/Lead-Time Volatility into a Sustainable Purchasing Portfolio Matrix: A Conceptual Matrix Framework and Empirical Case Study

Purchasing portfolio models, particularly the Kraljic matrix, are widely used to support sourcing decisions under supply risk. Yet, they are often criticized for relying on subjective assessments and focusing mainly on upstream uncertainty while neglecting downstream demand volatility. This study develops a quantitatively grounded purchasing portfolio framework that integrates demand volatility and lead-time volatility into a unified measure of supply risk to support more sustainable sourcing decisions. Using transactional data for 876 stock-keeping units (SKUs) from a pharmaceutical distribution company, demand and lead-time volatility are measured through coefficients of variation and combined using an adjusted multifactor model that accounts for their interdependence. Financial importance is measured objectively through gross profit and classified according to the 80–20 Pareto principle. These metrics are incorporated into a revised purchasing portfolio matrix that classifies items into strategic, leverage, bottleneck, and routine categories. The findings reveal substantial variation in combined volatility across SKUs and show that incorporating demand uncertainty significantly changes portfolio positioning compared with traditional approaches. By linking purchasing and marketing perspectives, the proposed model reduces subjectivity, improves risk visibility, and supports sustainable sourcing and inventory decisions in volatile environments.