Kraljic matrix What does it consist of?

Running a business without having an efficient purchasing policy can be complicated, in some cases even impossible. For this reason, it is important to have tools that allow you to correctly plan the strategies that will be used in purchasing management.

One of the most implemented is kraljic matrix, which allows to better classify all the materials, and even services, that will be purchased, taking into account all the risks that the company may go through and also the consequences it may have on the results.

If you want to know what it is and what does the Kraljic matrix consist of continue reading this post, here we will tell you how you should use it correctly.

What is the Kraljic matrix?

It is a strategy that allows companies to efficiently analyze their suppliers within the purchasing area. Some consider it as a key model for a company to emerge.

Therefore, it greatly benefits those who use it since it allows them to seek savings when making purchases of materials, ensuring that the substitutions are feasible, as well as the existence of a cooperation in conjunction with the strategic business.

What is the Kraljic matrix?

Being a system that is based on the cost function and the strategic need that a company goes through when dealing with different suppliers of resources, studies the possibilities of negotiating the prices they impose, changing providers, or directly ensuring a stable relationship with these.

This tool helps purchasing managers within companies to holistically assess which is the position of each of the suppliers and the importance they can represent within the business.

Thanks to this concept, currently the strategic vision with which purchases and suppliers are managed is much clearer, and a conclusion can be reached quickly and easily.

How the Kraljic matrix works

It is important to know what the basic operation of this type of tool is, in this way it can be better understood and it is well known in which situations it can be put into practice.

In terms of function, this process values ​​2 dimensions in particular, which are:

Supply risk

This is located on the horizontal axis of the matrix, and is classified from lowest to highest risk.

• It is considered lower risk when the products that can be purchased through several suppliers.
• On the other hand, those who, either in terms of suppliers or services, have a lower offer in the market are considered to be of greater risk, sometimes it can be unique.

Impact of results

It is located on the vertical axis of the matrix, and right in the highest part all the products or services that have been contracted and that have a high impact on the value strategic.

Based on the supply and demand that each of these products and services may have, financial costs can be defined in 4 different strategies:

1. Leveraged: these are those products or services that have a high impact on the results of the company, but at the same time can be purchased through several reliable suppliers of standardized quality, and can be replaced easily.
2. Strategic: in terms of quality and differentiation they can be considered as an important contribution. In addition, the products or services that are located in this type of strategy are limited in the market, which makes substitution difficult.
3. Routine: here you can classify all the products and services that, although they are necessary, are not critical to the company, therefore, they represent a fairly moderate impact on the structure of the costs.
4. Critics: also known as bottlenecks, they are those that can only be acquired by a very small number of suppliers, sometimes only one. Although its impact on costs is quite low, being so limited it can cause complications.

How to use the Kraljic matrix?

Knowing the theory it is quite easy to know exactly what to do, however, to know in a Specify what are the steps to follow to be able to use the kraljic matrix correctly en convenient.

1. Before starting with the graphs it is necessary to understand the main factors that it evaluates and how they can be applied to the situation itself.
2. Graphing the matrix is ​​simple, you only need one coordinate axis, where Y will be the impact of results and X the supply risk.
3. Within it, each of the supplies and materials that must be purchased regularly according to the two functions explained above must be placed.
4. The matrix must be divided into 4 quadrants, where the exact location of each of the dividing lines will depend on the circumstances of the company.
5. The materials should be placed in the quadrant based on the different strategies according to the impact of results that we explained previously.
6. Finally, one or more strategies for the quadrant must be designed.

Making and implementing a kraljic matrix can be one of the best decisions made within the company.