Kraljic Matrix: the Basics and Example
The Kraljic matrix helps you make procurement decisions faster and smarter, especially when everything seems like “just procurement” at first glance. The model immediately shows where the real money is and where the real risk lies. This prevents you from applying the same approach across the board, when some categories actually call for partnership and others for tough negotiations or risk management.
In this article, you’ll discover what the Kraljic matrix is and how to categorize products and services into four categories, each with its own strategy. You’ll also receive a clear step-by-step plan for filling out the matrix, an explanation of diversification in your procurement portfolio, and a concrete real-world example showing how the analysis leads to better priorities. Finally, you’ll find recommended reading to delve deeper and further substantiate the model. Enjoy the read.
What is Kraljic Matrix?
Peter Kraljic developed the Kraljic portfolio purchasing model in 1983 which serves as a matrix to help companies evaluate their purchasing portfolio.
The matrix system helps organizations track purchasing department work activities and their allocation between various products. The Kraljic Matrix also makes clear which articles can be subcontracted and therefore do not have to be ordered again and which articles involve a particular risk.
Dimensions of the Kraljic Matrix
This model is based on two dimensions by which the purchased materials and/or products can be classified.
Profit impact
This is defined from low to high. The company requires which materials for its strategic business operations?What added value do they deliver in the production line and what effect do the costs of these materials have on the company’s profitability?
Supply risk
This is also defined from high to low. To what extent is supply complex; is there abundance or scarcity?To what extent are the materials up-to-date and have the latest technology and materials substitutions been used?What are the logistics costs and are there monopoly or oligopoly conditions?
Figure 1 – Kraljic portfolio purchasing model
Procurement products
Using these two dimensions within the Kraljic matrix, Peter Kraljic distinguishes between four types of procurement products. The procurement process needs separate methods to handle its various procurement types. Only when you make that connection will the matrix really work for you.
Strategic products
Strategic products (High impact on profit and high delivery risk) have a major impact on profit and a high delivery risk. The list contains essential materials which serve as both raw materials and vital components that affect both product cost and production sustainability. They are usually purchased from a limited number of suppliers, sometimes even from a single party. The project faces a risk because it needs this particular task to proceed.
The balance of power between the company and the supplier is usually fairly even. The relationship between both parties would result in significant losses if it ended in failure. The organization needs to form a strategic alliance which will enable them to achieve their desired targets. The partnership requires common planning initiatives and extended contractual periods and collaborative development programs and particular service requirements which establish service excellence and product availability standards. The company needs to focus on maintaining operational continuity and delivering reliable results and developing new solutions instead of pursuing low prices.
Bottleneck products
The supply chain operates with high delivery risks because bottleneck products which do not create significant financial value. These are products or services that are indispensable to the process but difficult to obtain. The list includes particular items and expert services and extended delivery products.
The balance of power between the company and the supplier is often skewed in favor of the supplier. The strategy works to decrease the level of exposure which people face. Organizations take three main actions to reduce their dependence on single suppliers by creating emergency stock reserves and searching for backup suppliers and developing alternative product solutions.
Organizations can minimize their exposure to risks through the implementation of specific delivery schedules and service and support agreements which prevent major operational disruptions when disruptions occur.
Leverage products
Leverage products (High impact on profit and low delivery risk) have a clear impact on the cost price of the end product, while the delivery risk is relatively low.
There are multiple suppliers, products are easily comparable, and supply is sufficient. The total costs experience instant changes when any price variation or quality difference occurs.
The purchasing organization holds its strongest market position in this quadrant. This means that you mainly achieve results by making smart use of volume. The process of bundling purchases and tender organization and quote comparison and price negotiation requires immediate action.
Your purchasing operations will achieve their highest value through professional supplier relationships when you set particular performance targets and develop smart contract frameworks.
Routine products
Routine products (low impact on profit and low delivery risk) cause the fewest problems in terms of purchasing. The products offer restricted value because they exist in abundance throughout the market and customers can buy them from various suppliers. The list contains fundamental office supplies alongside typical household food products.
The balance of power between the company and the supplier is usually even here. The biggest profit lies less in the price per item and more in efficiency.
Your company can reduce both processing time and operational costs through standardized production methods and fixed supplier selection and catalog agreements and automated ordering systems. This means that employees have to pay as little attention as possible to this category, leaving more room for the product groups that really make a difference.
Kraljic matrix: Steps in the purchasing process
Peter Kraljic recommends the following steps in the entire purchasing process:
- Prepare portfolio analysis
- Organizations need to create particular evaluation standards which will enable them to assess profit changes and supply chain exposure levels.
- Determine the detail level of the portfolio analysis
- Fill in the Kraljic Matrix
- Analyze and discuss results
- The team needs to create their purchasing portfolio strategy while they work on specific improvement plans for every part of the framework.
- Implement and monitor strategy
The step-by-step process enables better management of stock inventory operations. This prevents obsolescent stock and excess supplies and this leads to cost reduction.
Spreading via the Kraljic portfolio purchasing model
The Kraljic portfolio purchasing model helps organizations build professional purchasing operations which lead to better procurement efficiency and major cost savings. The distribution of goods between the four quadrants needs to be done for risk reduction purposes.
A supplier should not have the upper hand nor have power over an organization. Precondition is that each product or product group can be placed into the matrix.
Preferably, a product is placed only in one of the quadrants. When agreement has been reached about the position of the products within the Kraljic portfolio purchasing model, it can be determined which actions need to be taken to achieve a better positioning.
The purchasing strategy can be prepared for each part of the this model. Subsequently, it can be concluded whether a product is in the right quadrant or whether it would be better to move it to another quadrant. In that case, discussions must be had with the supplier and new supply terms and conditions should be drawn up.
Tip: The Kraljic matrix helps organizations identify their essential suppliers but organizations need to use Supplier Relationship Management (SRM) to establish formal connections with these critical suppliers for better supplier management.
Kraljic matrix in practice: example of a procurement portfolio
A manufacturing facility which produces consumer goods operates as a business that has a moderate size. The company needs to purchase raw materials and packaging materials and IT licenses and office supplies every month which requires a substantial budget.
As long as you view everything as one large expense item, it remains unclear. The Kraljic matrix shows which supply chain components create the highest risk exposure while simultaneously affecting business operations of the organization.
The purchasing team begins their assessment process by using a basic evaluation approach. The team has determined that raw material expenses are high because the company depends on only a few large suppliers who generate production difficulties and reduce profit margins because of their delivery problems.
In the Kraljic matrix, these are classified as strategic products. The company needs to work together with others for planning purposes while extending their contracts because delivery dependability stands as their main priority.
The picture is different for packaging materials. The company needs to consider costs but it has multiple suppliers who reduce the chances of production failure. The category exists within the leveraged products segment. The organization should combine their printing orders to obtain better pricing while they should also work to get the best possible rates from their suppliers. The system provides excellent value for money through its simple design which avoids complicated features.
IT licenses form a third category. The total spend amount is lower than raw materials but the business depends heavily on these resources. The absence of software availability together with having only one supplier supplier creates a situation which blocks all business operations.
The Kraljic matrix identifies bottleneck products as the categories which produce these types of challenges. The strategy implements risk management through three main components which include support agreements and emergency response plans and alternative solution identification when possible.
Office supplies are the most straightforward. The product exists in large numbers because multiple suppliers offer it and the system shows minimal potential for breakdowns. In terms of the Kraljic matrix, these are non-critical products.
The main emphasis in this section centers on making things more convenient and efficient. The regular supplier and online catalog and automatic ordering system minimize the amount of time employees need to dedicate to this process.
The Kraljic matrix becomes simple to understand when we study purchasing portfolios by using this method. Managers and purchasers both observe the final destination of categories while engaging in distinct dialogues. The organization creates individualized plans for its different product lines which focus on particular market segments.
Frequently asked questions about the Kraljic matrix
When should you use the Kraljic matrix?
Use the Kraljic matrix when purchasing categories differ clearly in business impact and supply risk. It helps you decide where to focus first, instead of managing every purchase in the same way.
Start with the categories that create the most dependency, cost pressure, or continuity risk. Then use the matrix to choose the right approach: partnership, risk reduction, negotiation, or efficiency. This gives procurement more structure and better priorities.
What are the limitations of the Kraljic matrix?
Use the Kraljic matrix as a decision aid, not as a fixed outcome. The quality of the result depends on the criteria, data, and assumptions behind it. If those are weak, categories may end up in the wrong quadrant.
Also keep in mind that supply markets change. Prices, suppliers, and alternatives do not stay the same. Review the matrix regularly, and combine it with supplier management when you want to move from classification to daily execution.
How do you assess supply risk and profit impact objectively?
Start by agreeing on clear criteria before you score any category. For profit impact, look at spend, margin effect, operational importance, or impact on the customer offer. For supply risk, focus on scarcity, supplier dependency, switching difficulty, lead times, and available alternatives.
Then apply the same logic to every category. That makes the outcome easier to explain and easier to defend. A simple scoring model with weighted criteria helps reduce discussion based only on intuition.
What is the difference between the Kraljic matrix and supplier relationship management?
Use the Kraljic matrix to decide which categories need the most strategic attention. Use supplier relationship management to decide how you manage the suppliers behind those categories.
The difference is practical. The matrix helps you set priorities. SRM helps you turn those priorities into stronger cooperation, better performance, and clearer agreements over time.
Recommended books and articles about the Kraljic matrix
These books and articles includes Kraljic’s original work and current operational knowledge which these publications provide. The research combines theoretical concepts with practical implementation methods which enable purchasing and supply chain professionals to use the matrix effectively in their daily work activities.
- Caniels, M. C. J., & Gelderman, C. (2005). Purchasing strategies in the Kraljic matrix — a power and dependence perspective. Journal of Purchasing and Supply Management, 11, 141–155. → This study deepens the model with factors such as power and dependence between buyer and supplier; helps to show that not every relationship is “one size fits all”.
- Hesping, F., & Schiele, H. (2016). Matching tactical sourcing levers with the Kraljic matrix. Journal of Supply Chain Management, 52(2), 18–36. → This artcile investigates whether and how different tactics are used per quadrant of the matrix — important to enrich your article with empirical evidence rather than just theory.
- Kraljic, P. (1983). Purchasing must become supply management. Harvard Business Review, 61(5), 109-117. → The classic and original source of the matrix. The model requires this information to understand its fundamental concepts and operational logic.
- Lysons, K., & Farrington, B. (2016). Purchasing and Supply Chain Management. Harlow, UK: Pearson. → The article provides organizations with theoretical frameworks which they can use to execute Kraljic matrix implementation within their regular business activities. It shows businesses using the Kraljic matrix in real-world scenarios to prove its effectiveness in business operations.
- Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2022). Purchasing and Supply Chain Management. MA: Cengage. → This article presents current information about purchasing methods and risk management and supplier connection which establishes the Kraljic matrix as a useful tool for contemporary supply chain operations.
- Montgomery, R. T., & Weinberg, C. B. (2018). A quantified Kraljic Portfolio Matrix: Using decision analysis to support purchasing decisions. Journal of Supply Chain Decisions, 4(1), 22–38. → Shows how to quantify the matrix and use it more objectively for strategic purchasing — super useful if you want to help your readers apply the Kraljic matrix in practice.
- van Weele, A. J. (2020). Purchasing and Supply Chain Management: Analysis, Planning and Practice. London, UK: Cengage. → This book places the Kraljic matrix in the broader field of purchasing & supply chain management and helps your readers understand how the matrix works in conjunction with other strategies.
- Ye, Y. (2021). Empirical investigation of Kraljic portfolio matrix in service procurement. Journal of Supply Chain Management and Operations, 19(2), 45–61. → this article applies the model to services (rather than physical goods), demonstrating the matrix’s broad applicability. Highly relevant for modern organizations with significant service procurement.
How to cite this article:
Mulder, P. (2013). Kraljic Matrix. Retrieved [insert date] from Toolshero: https://www.toolshero.com/strategy/kraljic-matrix/
Original publication date: October 28, 2013 | Last update: April 5, 2026
Add a link to this page on your website:
<a href=”https://www.toolshero.com/strategy/kraljic-matrix/”>Toolshero: Kraljic Matrix</a>
Related ARTICLES
SWOT Analysis explained including a template
Peter Kraljic biography and books
Transaction Cost Economics (TCE): the Theory and Example
Porter Five Forces model explained: the Basics
