Kraljic Matrix: Quadrants, Strategies and How to Apply It

Do you need to manage a broad and complex portfolio of goods and services? Not every screw has the same strategic importance as a core component of your production. So how do you differentiate systematically, and how do you make sure time, money and people go into the procurement activities that really matter?

This is where the Kraljic matrix comes in. It gives your purchasing a clear direction and turns it from a purely operational function into a real value driver for the business.

What is the Kraljic matrix?

The Kraljic matrix is a portfolio model for purchasing. It sorts everything you buy by two criteria, profit impact and supply risk, into four quadrants: non-critical items, leverage items, bottleneck items and strategic items. Each quadrant has its own purchasing strategy.

The model was developed by Peter Kraljic, who introduced it in 1983 in his Harvard Business Review article "Purchasing Must Become Supply Management".

The two dimensions of the matrix: profit impact and supply risk

To use the matrix effectively, you need a clear understanding of its two axes. They form the foundation of the entire analysis.

• Profit impact: The vertical axis measures how much an item affects profitability. Criteria include purchasing volume, share of total costs or importance for the quality of the end product.
• Supply risk: The horizontal axis assesses complexity and risk in the supply market. Risk rises with few vendors or a single vendor (monopoly), high logistical complexity, price volatility or political instability in the countries of origin.

The four quadrants of the Kraljic matrix and their strategies

Combining the two dimensions produces four quadrants, each with its own strategic direction.

1. Non-critical items

These items have low profit impact and low supply risk. Typical examples are office supplies, cleaning products and other C-parts. The strategy: process efficiency. The goal is to minimize administrative effort, for example through automated ordering systems, e-catalogs and bundled demand.

This is often where most of the effort sits: many small orders, many vendors, low item value. According to HTWK Leipzig, digital procurement reduces process costs per order from €146 to €86. On simple system, more than 28,000 buyers order these items from over 1,000 vendors through one access point, with digital approvals and direct transfer to the ERP.

2. Leverage items

Leverage items have high profit impact but low supply risk, because there are many vendors in the market. This is where the big savings potential lies. The strategy: use competition. Targeted tenders, firm price negotiations and a search for alternative vendors let you use your market power and cut costs significantly.

3. Bottleneck items

These items have low profit impact but high supply risk. They are often specific spare parts or chemicals with only one vendor. The strategy: security of supply. Availability comes first, to avoid production downtime. Measures include higher safety stock, looking for substitutes and developing alternative vendors.

4. Strategic items

These items matter most to the business: they have both high profit impact and high supply risk. The strategy: partnership. The focus is on long-term, trust-based relationships with strategic vendors. Joint development, high transparency and intensive supplier relationship management are key to success on both sides.

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How to apply the Kraljic matrix in 4 steps

Putting the matrix into practice in procurement and supply chain management breaks down into four steps:

1. Portfolio analysis: Record all the products and services you buy. Complementary methods such as ABC analysis help structure the portfolio by purchasing volume.
2. Market analysis: Assess the supply market for your most important product groups. How complex is it? How is power distributed between vendors and buyers?
3. Positioning in the matrix: Assign each item or product group to a quadrant based on steps 1 and 2.
4. Strategy development: Derive concrete strategies for each quadrant and set an action plan. Review the classification regularly.

Advantages and limitations of the model

The Kraljic matrix is an established tool, but like any model it has limits. The German procurement association BME (Bundesverband Materialwirtschaft, Einkauf und Logistik e. V.) also sees a strategic purchasing approach, as promoted by the matrix, as essential for business success.

Advantages:

• Focus on strategically important items
• Targeted use of purchasing resources
• Systematic risk reduction in the supply chain
• A clear, traceable basis for procurement decisions

Disadvantages:

• Rating the axes can be subjective.
• The model is fairly static and only partly reflects dynamic market changes.
• Innovation potential at vendors classified as "non-critical" is easily overlooked.

Conclusion: more than a matrix

The Kraljic matrix is more than a portfolio tool. It makes sure your company sees purchasing not as order processing, but as a strategic function that contributes to profitability and risk reduction. With differentiated strategies, you have the right answer for every category, from efficient handling of C-parts to resilient partnerships with strategic vendors.

Want to reduce the effort for non-critical items? Try simple system free for 30 days or book a demo.

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