Despite being invented in 1952 (and first applied to purchasing in 1983 by Peter Kraljic), the Kraljic Matrix has, in recent years, it has become a highly useful approach for categorizing suppliers and guiding negotiation strategies.
But what Is the Kraljic Matrix? The matrix is based on two key factors: supply risk and profit impact. By categorizing providers and suppliers into four quadrants, it helps companies prioritize procurement activities and develop tailored strategies for each category.
Classification and Overview of the Four Types:
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Non-Critical Items: Low supply risk, low profit impact. Focus on process efficiency and cost control. E.g., office supplies, low-value consumables.
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Leverage Items: Low supply risk, high profit impact. E.g., miscellaneous materials or components with many suppliers.
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Bottleneck Items: High supply risk, low profit impact. Secure supply continuity through strong relationships or stockpiling. E.g., specific parts or materials.
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Strategic Items: High supply risk, high profit impact.Develop long-term partnerships and joint value creation initiatives. E.g., key raw materials that are critical to operations.
Why Is It Important for Negotiation?
The Kraljic Matrix is critical for negotiation because it:
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Aligns Priorities: By understanding where a supplier or category falls within the matrix, procurement teams can allocate resources and focus efforts more effectively.
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Supports Strategy Development: Enables the use of different negotiation tactics, including collaborative partnerships.
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Enhances Risk Management: Highlights potential vulnerabilities in the supply chain.
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Optimizes Value Creation: Helps companies maximize value and strengthen their competitive position by tailoring approaches to supplier categories.
The Kraljic Matrix is an indispensable tool for procurement, allowing buyers and category managers to align their sourcing strategies with company goals by categorizing suppliers based on supply risk and profit impact.
If you need assistance in applying this matrix as part of your strategy to manage supplier relationships and make informed decisions, contact Plan C! We’ll do it together!
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