Some implications of using Kraljic´s Matrix from a category perspective

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When working with clients the last couple of years I have noticed a clear trend in the interest and usage of Kraljic’s Matrix as a tool to get a common view and understanding of commodities also on category level and not only on company level. When Peter Kraljic wrote his article “Purchasing Must Become Supply Management” back in 1983 I don’t think he intended the model to be used like that. If that was the intention he actually missed out on a big portion of information and recommendations.

What I am referring to is the fact that nowhere in his article you can find guidelines on exactly where you should plot in your sub categories in the Matrix when not fully aware of the big picture. It is all up to your subjective judgment. When looking at the Matrix from a category perspective, especially if the purchaser/category responsible is doing the analysis, there is an obvious risk for over-estimating the spend impact (y-axis) and also the complexity of the supply market (x-axis). The end result will be an overpopulation of “strategic” subcategories and you will miss out on a lot of easy-to-source subcategories where you simply put “apply the wrong medicine” to approach your category.

The result of overestimating “importance of purchasing” and the “complexity of supply market” leading to the wrong conclusions on how to act.

One quick fix for this problem is that purchasing mgmt decide and communicate general rules and guidelines on how to use the matrix. To once and for all define what they mean with small, big, large spend impact, number of suppliers, entry barriers etc. Some areas will still be judged subjectively but at least you have a framework for reference and that will prevent the tendency to move into the wrong part of the matrix with your sub categories leading to the wrong kind of decisions.

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