What is kraljics matrix and how can products be moved from one part of the matrix to the other?
Intro: it is the first comprehensive purchasing model introduced by Kraljic (1983). It was targeted at aiding purchasers in deciding what purchasing strategy to use for which product. Its main aim is to minimize supply risk and make the most of buying power. The approach includes the construction of a 2x2 four-category portfolio matrix that classifies products on the basis of two dimensions: profit impact, and supply risk („low‟ and „high‟). The four categories include bottleneck, routine, leverage and strategic items. The category within which an item falls on the matrix determines the approach towards suppliers.
* Bottleneck items on the other hand provide a lot of problems and risks. Volume insurance, vendor control, security of inventories and backup plans are recommended here.
* Non-critical items: require efficient processing, product standardization, order volume and inventory optimization
* Leverage items: allow the buying company to exploit its full purchasing power, for instance through tendering, target pricing and product substitution.
* Strategic items: a further analysis is recommended. By plotting the buying strengths against the strengths of the supply market, three basic power positions are identified and associated with three different supplier strategies: balance, exploit and diversify.
In a survey of Dutch companies Boodie (1997) found that almost 50% of the responding purchasing managers indicated that they used Kraljic for formulating purchasing strategies. Of the large companies with more than 5000 employees, 85% reported the use of portfolio analysis.
According Van Weele 2000, many years after its introduction, the portfolio matrix is being used by several large companies such as Shell, Alcatel Philips etc
How are products moved within the matrix?
In a paper for the 11th IPSERA...