Kraljic Matrix

What is the Kraljix Matrix?

The Kraljic matrix is a tool used to determine the risk of supply of materials from suppliers that feed into the supply chain, this supports procurement professionals with determining who they should form a close co-dependant or partnership relationship with and which suppliers it is more effective to build a more distant adversarial or arms length relationship with. 

Determining the type of relationship by positioning supplier by Risk and profit impact will support procurement professionals to build the right type of relationships and utilise their time more efficiently whilst mitigating supply risk for their organisation.

You can access the Kraljic Matrix tools which are available through CIPS Knowledge:

The vertical axis, labelled ‘Risk’, is concerned with the degree of difficulty associated with sourcing a product or service, or the vulnerability of the client organisation to a failure of the supplier to provide the product or service on time, or to the failure ‘in service’ of a supply.

The horizontal axis, ‘Profit potential’, is used to indicate the extent of the potential of the supply to contribute to the profitability (or efficiency) of the buying concern. This profit potential might be realised by achieving lower costs, either by paying a lower price for a good or service or by introducing more efficient buying methods.

What are the types of supplier relationships?

The key commodities or services for which a company wishes to develop tailored procurement strategies can be ranked as high or low in terms both of risk exposure and of procurement potential.  The score of an item in respect of each of these criteria determines the positioning of the commodity or service on the procurement positioning/targeting matrix.  The quadrants of the matrix represent the four categories, which are:

  • Critical
  • Leverage
  • Bottleneck
  • Routine

Following the classification of risk impact and cost impact to your business that each supplier potentially holds, you can then identify the type of relationship that you should consider building with the supplier and how to mitigate supply risk to your organisation.

To find out more about this subject read the full knowledge paper: Kraljic Matrix

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Kraljic Matrix

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For addition reading on this topic visit: Supplier Relationship Management

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