The Kraljic Matrix
Managing suppliers correctly is important in procurement. It is a key part of risk management and achieving good value for money over the life of the contract.
But different types of suppliers need different styles of management, so it is worth spending some time identifying what types of suppliers you are buying products and services from.
One way to do this is using a tool called the Kraljic Matrix, which looks at the things you buy across two dimensions. This was created by a man called Peter Kraljic, who wrote that suppliers fall in to one of four segments, based on how much the goods or services cost and how much risk they present to your organisation.
- Routine suppliers: Products that have a low impact in terms of cost and risk on your organisation and that are easy to obtain from other suppliers, such as office stationery. Your goal should aim to make the procurement process as efficient as possible. Delegate buying to local managers or use catalogues.
- Leverage suppliers:Products that are important for your organisation but are easy to buy with plenty of competition. Make the most of your bargaining power in a competitive market with regular renegotiations.
- Bottleneck suppliers:Products that are inexpensive but with few alternative suppliers. You should aim to build a long-term relationship with your supplier to guarantee supply, with less emphasis on cost
- Strategic suppliers:Products that are critical for your organisation, with a big financial impact but also difficult to source from alternative suppliers. You should work very closely with your supplier. Be aware of any technical innovation or threats to supply, which could have an impact on your relationship.
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