As sourcing professionals, we understand the importance of optimising purchasing strategies to ensure efficiency and sustainability in our import processes. One of the most influential models in this area is the Kraljic Matrix, an essential tool for any sourcing professional.
The Kraljic Matrix was developed by Peter Kraljic in 1983 and has since revolutionised the way companies approach their purchasing strategies. This matrix ranks products and services according to two main criteria: impact on the bottom line and supply risk. This model allows companies to identify which products require more careful and strategic management due to their high value or risk.
Today, supply chains are becoming increasingly complex and globalised (especially with the recent introduction of artificial intelligence). Faced with this situation, the Kraljic Matrix becomes a valuable tool because it allows us to analyse and categorise our import products so that we can anticipate risks, optimise costs and ensure continuity of supply.
Benefits of its application
The implementation of the Kraljic Matrix brings multiple advantages, significantly transforming sourcing strategies. Bearing in mind that every company is different – in terms of size, sector and other characteristics – these are the most important benefits of its use.
- Maximising benefits and minimising risks: The Kraljic Matrix enables us to improve our ability to maximise profits and minimise the risks associated with sourcing. By ranking our products and services and managing our suppliers strategically, we can ensure that purchasing decisions support both our financial stability and business continuity.
- Strategic approach to supplier management: You know how much importance we place on supplier management in our blog, which is why we consider the implementation of the Kraljic Matrix to be so important. Thanks to it, each supplier and product is carefully evaluated, allowing us to make more informed and long-term decisions.
- Optimisation of efforts and resources: The Kraljic Matrix guides us to focus our efforts and resources on the areas where the gains are most significant. This means we can devote more time and resources to managing the products and suppliers that have the greatest impact on our business, thus ensuring greater operational efficiency.
- Ease of understanding and collaboration: A particularly valuable aspect of the Kraljic Matrix is its simplicity and conceptual clarity. This ease of understanding facilitates implementation at all levels and improves collaboration between departments by providing a common framework that everyone can understand and use, which is essential for internal presentations and strategic alignment between different teams.
Practical application of the Kraljic Matrix
In an import context such as our day-to-day business, the Kraljic Matrix is used to segment products into four categories: leverage, bottleneck, non-critical and strategic. This will allow us to adopt different purchasing strategies for each category:
- Leverage products: Products that are important to our financial performance, but with low supply risk. Here, we focus on negotiating the best possible prices, taking advantage of our market position.
- Bottleneck products: These are products with high supply risk but lower financial impact. Our strategy will focus on ensuring availability and seeking alternatives or substitutes.
- Non-critical products: These have a low impact on financial results and a low supply risk. For these products, we adopt an efficiency strategy, minimising the time and resources invested in their purchase.
- Strategic products: These have high financial impact and high supply risk. Here, the strategy is to develop long-term relationships with reliable suppliers and to deeply understand the market to anticipate changes.
Problems with the Kraljic Matrix? Leave your procurement management to a professional
As industry professionals, we understand that implementing and making the most of the Kraljic Matrix – as well as other advanced sourcing strategies – is not an easy task and can present challenges, especially for companies taking their first steps in importing. If you need help to optimise your supply chain or to improve any stage of your import process, sourcing with a sourcing partner is one of the best decisions you can make.
At S3 Group, we are dedicated to offering customised solutions that adapt to the specific needs of your business, guaranteeing efficient, cost-effective management that is aligned with your company’s commercial objectives. We know how important theoretical concepts (such as the Kraljic Matrix) are, but our 20 years of experience in the industry has taught us that success is built on the sum of knowledge and practice.