Kraljic Matrix – What Is It, Functioning, and Usage?

Running a business without an effective purchasing policy can be difficult, in some cases, even impossible. For this reason, it is essential to have tools that allow you to correctly plan the strategies that will be used in purchasing management. One of the most implemented is the Kraljic matrix, which allows us to classify better all the materials and even services that will be purchased, taking into account all the risks that the company may face and its consequences have on results.

If you want to know what the Kraljic matrix is and what it consists of, continue reading this post, here we will tell you how you should use it correctly.

What is the Kraljic matrix?

It is a strategy that allows companies to analyze their suppliers within the purchasing area efficiently. Some consider it as a key model for a company to emerge.

Therefore, this greatly benefits those who use it, since it enables savings to be made when purchasing materials, making substitutions feasible, as well as the existence of cooperation with the company’s strategies.

Being a system that is based on the function of cost and the strategic need that a company goes through when dealing with different resource providers, it studies the possibilities of negotiating the prices that they impose, changing providers, or directly ensuring a stable relationship with these.

This tool helps to purchase managers within companies to holistically assess each of the suppliers’ position and the importance they can represent within the company.

Thanks to this concept, currently, the strategic vision with which purchases and suppliers are managed is much clearer, and a conclusion can be reached quickly and easily.

The functioning of the Kraljic matrix

It is important to know what the essential operation of this type of tool is. In this way, it can be better understood, and it is perfectly known in which situations it can be put into practice.

In terms of function, this process values ​​two dimensions in particular, which are:

Supply risk

This is located on the horizontal axis of the matrix and is classified from lowest to highest risk.

  • It is considered a lower risk when products can be purchased through various suppliers.
  • On the other hand, those who, in terms of suppliers or services, have a lower offer in the market, are considered to be at higher risk, sometimes it may become unique.

Impact of results

It is located on the vertical axis of the matrix, and just in the highest part, you will find all the products or services that have been contracted and that have a high impact within the strategic value.

Based on the supply and demand that each of these products and services may have, financial costs can be defined in 4 different strategies:

  • Leveraged: these are those products or services that have a high impact on the company’s results. At the same time, they can be purchased through various reliable and standardized quality suppliers and can be easily replaced.
  • Strategic: in terms of quality and differentiation, they can be considered as an essential contribution. Also, the products or services that are located in this type of strategy are limited in the market, which makes replacement difficult.
  • RoutinesNot-Critical“: here, you can classify all the products and services that, although necessary, are not critical for the company. Therefore, they represent a reasonably moderate impact on the cost structure.
  • Critical: also known as a Bottleneck, they are those that can only be purchased by a minimal number of suppliers, sometimes only one. Even though its impact on costs is quite low, being so limited can cause complications.

How to use the Kraljic matrix?

Knowing the theory, it is quite easy to know exactly what to do; however, knowing precisely what are the steps to be followed to use the kraljic matrix correctly is ​​convenient.

  • Before starting with the charts, it is necessary to understand the main factors that it evaluates and how they can be applied to the situation itself.
  • Graphing the matrix is ​​simple; you only need a coordinate axis, where Y will be the impact of results and X the risk of supply.
  • Within it, each of the supplies and materials that must be purchased regularly must be placed according to the two functions explained above.
  • The matrix must be divided into four quadrants, where the exact location of each of the dividing lines will depend on the company’s circumstances.
  • The materials should be placed in the quadrant based on the different strategies according to the impact of the results that we explained previously.
  • Finally, one or more quadrant strategies must be designed.

Making and implementing a kraljic matrix can be one of the best decisions made within the company.

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Ahmed Ismail

I'm a Civil Engineer. I like reading everything related to Business so I decided to launch the "Fast Grow Company" website to help Entrepreneurs in their business journey. Keep updated and follow us.

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