How do you use Kraljic's matrix to classify your suppliers?

1 What is Kraljic's matrix?

Kraljic's matrix is a framework developed by Peter Kraljic in 1983 to help purchasing managers analyze their procurement portfolio and devise appropriate sourcing strategies. The matrix consists of four quadrants, each representing a different type of supplier relationship: leverage, strategic, bottleneck, and non-critical. The position of each supplier on the matrix depends on the value and scarcity of the item they provide, as well as the level of competition and uncertainty in the supply market.

2 How to use Kraljic's matrix?

To use Kraljic's matrix, you need to assess each supplier or item according to two criteria: the strategic importance and the supply risk. The strategic importance reflects the impact of the item on your business performance, such as cost, quality, innovation, or differentiation. The supply risk reflects the difficulty of obtaining the item, such as availability, reliability, substitutability, or volatility. You can use a scoring system or a qualitative judgment to rank your suppliers or items along these dimensions.

4 How to manage strategic suppliers?

Strategic suppliers are those who provide high-value and high-risk items, such as critical or customized products. These suppliers are scarce and difficult to replace, so you have a weak bargaining power and a high dependency on them. The best strategy for managing strategic suppliers is to collaborate and build long-term partnerships based on trust, mutual benefit, and innovation. You can also use joint planning, information sharing, or co-development to enhance your relationship and performance.

5 How to manage bottleneck suppliers?

Bottleneck suppliers are those who provide low-value but high-risk items, such as specialized or rare products. These suppliers are few and hard to find, so you have a low bargaining power and a high vulnerability to supply disruptions. The best strategy for managing bottleneck suppliers is to diversify and reduce your reliance on them. You can also use contingency planning, safety stocks, or alternative sources to mitigate your risk and ensure continuity.

6 How to manage non-critical suppliers?

Non-critical suppliers are those who provide low-value and low-risk items, such as routine or common products. These suppliers are plentiful and easy to substitute, so you have a high bargaining power and a low dependency on them. The best strategy for managing non-critical suppliers is to simplify and automate your transactions with them. You can also use standardization, consolidation, or e-procurement to lower your costs and increase your efficiency.