Elaborated some 40 years ago the Kraljic matrix may seem obsolete to younger CPOs, but let's take a closer look to see if it can still inspire effective approaches to procurement.
This approach results in a preliminary mapping that categories purchases under four main quadrants:
- 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐢𝐭𝐞𝐦𝐬 are those that are critical to the organisation and have a high supply risk and require close supplier relationships to ensure continuity of supply.
- 𝐋𝐞𝐯𝐞𝐫𝐚𝐠𝐞 𝐢𝐭𝐞𝐦𝐬 are those that have a high profit impact, but low supply risk, and are usually sourced through competitive bidding.
- 𝐁𝐨𝐭𝐭𝐥𝐞𝐧𝐞𝐜𝐤 𝐢𝐭𝐞𝐦𝐬 are those that have a high supply risk, but low profit impact, and require careful management to ensure continuity of supply.
- 𝐍𝐨𝐧-𝐜𝐫𝐢𝐭𝐢𝐜𝐚𝐥 𝐢𝐭𝐞𝐦𝐬 are those that have a low profit impact and low supply risk and are usually simply sourced through catalogues.
This mapping is very effective and still relevant as it allows companies to:
However, there are also some potential drawbacks that should be taken into consideration:
- 𝐓𝐡𝐞 𝐚𝐧𝐚𝐥𝐲𝐬𝐢𝐬 𝐦𝐚𝐲 𝐨𝐯𝐞𝐫𝐬𝐢𝐦𝐩𝐥𝐢𝐟𝐲 𝐭𝐡𝐞 𝐜𝐨𝐦𝐩𝐥𝐞𝐱𝐢𝐭𝐲 𝐨𝐟 𝐩𝐫𝐨𝐜𝐮𝐫𝐞𝐦𝐞𝐧𝐭 𝐚𝐜𝐭𝐢𝐯𝐢𝐭𝐢𝐞𝐬, and not take into account other factors such as quality, delivery time, and innovation.
- 𝐓𝐡𝐞 𝐚𝐧𝐚𝐥𝐲𝐬𝐢𝐬 𝐦𝐚𝐲 𝐧𝐨𝐭 𝐛𝐞 𝐚𝐩𝐩𝐫𝐨𝐩𝐫𝐢𝐚𝐭𝐞 𝐟𝐨𝐫 𝐚𝐥𝐥 𝐭𝐲𝐩𝐞𝐬 𝐨𝐟 𝐨𝐫𝐠𝐚𝐧𝐢𝐬𝐚𝐭𝐢𝐨𝐧𝐬 and may not be effective in industries with rapidly evolving markets.
- 𝐓𝐡𝐞 𝐚𝐧𝐚𝐥𝐲𝐬𝐢𝐬 𝐦𝐚𝐲 𝐧𝐨𝐭 𝐛𝐞 𝐚𝐛𝐥𝐞 𝐭𝐨 𝐜𝐚𝐩𝐭𝐮𝐫𝐞 𝐚𝐥𝐥 𝐭𝐡𝐞 𝐫𝐢𝐬𝐤𝐬 𝐚𝐬𝐬𝐨𝐜𝐢𝐚𝐭𝐞𝐝 𝐰𝐢𝐭𝐡 𝐚 𝐩𝐮𝐫𝐜𝐡𝐚𝐬𝐞 and may not provide a complete picture of the organisation's procurement activities. For example, it doesn't take into account external factors such as political instability, natural disasters, and changes in regulations that may impact the supply chain. Additionally, the Kraljic matrix only focuses on two dimensions of procurement (supply risk and profit impact) and does not provide a comprehensive view of the organisation's procurement activities, such as supplier relationships, contract management, and supplier performance.