Kraljic Matrix Template
The Kraljic Matrix is a strategic tool utilised by procurement and supply chain professionals to minimise supply risks by identifying the importance of suppliers' products and services. By categorising suppliers based on risk and profit impact, the tool can reveal supply chain weaknesses, facilitate strategy development, and reduce supply disruption.
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Professionals can use the Kraljic Matrix to determine the most suitable type of supplier relationships and optimise their time while mitigating supply risks for their organisation. The tool defines:
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Supply Risk - The level of difficulty in sourcing a product or service and its potential vulnerability to the organisation.
Profit impact - This is used to measure the extent of supply's contribution to profitability, which could be enhanced by lowering costs through better buying methods or lower prices for goods and services.
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The Kraljic Matrix comprises four key quadrants
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Critical: This category includes high-risk, strategic products with a few suppliers and high-profit impact, such as assemblies, engines, and optics. The balance of power in purchaser-supplier relationships affects this group, and performance-based partnerships are the most effective strategy.
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Leverage: This buyer-dominated segment involves competitive bidding and low risk due to many alternative suppliers and substitutions, like steel plate and sections. Leverage products allow the buying company to exploit its full purchasing power through tendering, target pricing, and product substitution.
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Bottleneck: Bottleneck products are limited-in-value products vulnerable to sudden price increases and a limited number of alternative suppliers, such as natural flavors, vitamins, and pigments. Thus, securing long- and short-term supply and seeking alternative suppliers is a priority for this group.
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Non-Critical (or Routine)This low-risk category includes routine products, such as basic office supplies, standard maintenance and repair items (MRO), and consumables, that are well-suited to systems contracting and e-procurement solutions. Efficient processing, product standardisation, order volume, and inventory management are crucial for this category.
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For for more information on how to use it you can check out the video below:
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