Kraljic Matrix: the Basics and Example
The Kraljic matrix helps organizations make better procurement decisions by showing which purchases deserve the most attention. Not every product or service creates the same impact. Some categories mainly affect efficiency, while others directly influence continuity, cost, or business performance.
This matters because many procurement teams still treat very different categories in roughly the same way. That creates unnecessary risk. It can also lead to missed savings, weak supplier choices, or too much time spent on purchases that have little strategic value.
In this article, you will discover what the Kraljic matrix is, how the four categories work, and how to apply the model in practice. You will also learn which procurement strategy fits each quadrant, how to fill in the matrix step by step, and how this leads to clearer priorities and better supplier decisions. Enjoy reading.
What is the Kraljic Matrix?
The Kraljic matrix is a procurement model that helps organizations classify products and services based on two factors: profit impact and supply risk. The model was developed by Peter Kraljic in 1983 and is still widely used in procurement and supply chain management.
The idea behind the model is simple. Not every purchase should be managed in the same way. Some purchases are easy to replace and have little financial impact. Others are essential, expensive, or difficult to source. When those differences are ignored, procurement teams often use too much time on routine purchases and too little attention on categories that really matter.
The Kraljic matrix helps create that distinction. It shows which categories need efficiency, which require negotiation, which call for risk reduction, and which deserve strategic supplier cooperation. This gives procurement more focus and helps organizations use time, budget, and supplier relationships more effectively.
In practice, the model is often used to:
- identifying purchasing categories that are critical to the organization
- reducing dependency on one supplier or a small group of suppliers
- making sourcing decisions with more focus
- choosing the right approach for different supplier relationships
- creating a healthier balance across the procurement portfolio
That makes the Kraljic matrix useful for both operational purchasing and more strategic procurement decisions.
Dimensions of the Kraljic Matrix
The Kraljic matrix uses two dimensions to classify procurement categories: profit impact and supply risk. Together, these dimensions help organizations decide which purchases need efficiency, which create room for negotiation, and which require closer supplier management.
Figure 1 – Kraljic portfolio purchasing model
Profit impact
Profit impact shows how strongly a product or service affects the organization’s financial or operational performance. This can relate to spend, margin, production continuity, quality, or the value delivered to the customer.
A category usually has a high profit impact when it plays an important role in the final product, has a clear effect on total cost, or directly influences business performance. Categories with a lower impact are usually easier to manage because they affect results less directly.
Supply risk
Supply risk shows how difficult it is to source a product or service reliably. This depends on factors such as scarcity, supplier dependency, switching costs, lead times, logistics complexity, and the availability of alternatives.
A category has a higher supply risk when few suppliers are available, replacement is difficult, or disruption would quickly affect operations. A lower supply risk means supply is relatively stable, alternatives are available, and continuity is easier to protect.
Procurement products
When these two dimensions are combined, the Kraljic matrix divides procurement categories into four groups. Each group asks for a different approach. That is exactly what makes the model useful in practice.
Some categories mainly ask for efficiency and standardization. Others require stronger negotiation, closer supplier cooperation, or active risk reduction. When procurement teams treat every category in the same way, they often miss savings in one area and create avoidable risk in another.
The four groups in the Kraljic matrix are strategic products, bottleneck products, leverage products, and routine products. Together, they help organizations set clearer priorities and choose a procurement strategy that fits the category.
Strategic products
Strategic products have a high profit impact and a high supply risk. These are often critical materials, components, or services that strongly affect continuity, cost, quality, or competitive position. At the same time, they are not easy to replace.
Organizations often depend on a limited number of suppliers in this quadrant. In some cases, there may even be only one realistic supplier. That creates mutual dependency. If the relationship breaks down or delivery fails, the consequences can be serious.
This means price should not be the only focus. Strategic products usually require long-term cooperation, reliable agreements, shared planning, and regular contact with suppliers. The goal is to protect continuity, reduce risk, and build a relationship that supports stable performance over time.
Bottleneck products
Bottleneck products have a low profit impact and a high supply risk. They do not represent the largest share of total spend, but they can still disrupt operations when supply is unreliable or alternatives are limited.
These are often specialized items, technical parts, niche materials, or services that are difficult to source. The business may not spend much on them, yet dependency is still high. That is what makes this category risky.
In this quadrant, the main priority is not aggressive cost reduction but continuity. Organizations often reduce risk by building safety stock, searching for backup suppliers, agreeing on clear delivery arrangements, or exploring alternative solutions. The goal is to prevent small categories from causing major disruption.
Leverage products
Leverage products have a high profit impact and a low supply risk. These categories matter financially, but they are relatively easy to source because multiple suppliers are available and products are often comparable.
This gives the buying organization a stronger position in the market. Because supply is stable and choice is wider, procurement can focus more on commercial advantage. Small improvements in price, terms, or quality can make a noticeable difference to total cost.
That is why this quadrant is often managed through volume bundling, supplier comparison, tendering, and negotiation. The aim is to use purchasing power in a smart way while keeping performance and quality at the right level.
Routine products
Routine products have a low profit impact and a low supply risk. These are standard purchases that are easy to source, widely available, and usually not critical to the organization’s performance.
Because the risk is low and the financial impact is limited, the biggest gain is usually not found in price negotiation. It is found in simplicity and efficiency. Too much attention for this category often costs more than it delivers.
That is why organizations usually manage routine products through standardization, fixed suppliers, catalog agreements, and automated ordering processes. The goal is to reduce administrative effort and free up time for categories that require more strategic attention.
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.
How the Kraljic matrix improves portfolio balance
The Kraljic matrix helps organizations create a better balance in their procurement portfolio. By dividing categories across four quadrants, it becomes easier to see where dependency is too high, where purchasing power can be used more effectively, and where process efficiency matters most.
This matters because procurement risk is rarely spread evenly. Some categories are easy to buy and easy to replace. Others create dependency, continuity risk, or pressure on margins. The matrix helps make those differences visible.
Each product group should ideally be placed in the quadrant that best matches its actual position. Once that is clear, procurement teams can decide whether the current situation is acceptable or whether action is needed. For example, an organization may want to reduce dependency on a bottleneck product, improve agreements around a strategic category, or simplify the handling of routine products.
In that sense, the model does more than classify purchases. It also supports better decisions about supplier relationships, sourcing priorities, and risk distribution across the wider procurement portfolio.
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
Consider a mid-sized manufacturer of consumer goods. Each month, the company purchases raw materials, packaging materials, IT licenses, and office supplies. At first glance, these all seem to belong to the same procurement process. In practice, however, they create very different risks and priorities.
Raw materials usually fall into the strategic category. They represent a large share of total cost and are essential to production. If only a small number of suppliers are available, dependency quickly increases. In that situation, the company benefits more from long-term cooperation and supply security than from focusing only on the lowest price.
Packaging materials often fall into the leverage category. They affect cost, but supply risk is usually lower because multiple suppliers are active in the market. This gives procurement more room to compare offers, bundle volume, and negotiate better terms.
IT licenses can become bottleneck products. The total spend may be lower than with raw materials, but dependency can still be high. If the organization relies on one provider and no practical alternative is available, disruption can affect daily operations immediately. In that case, risk reduction becomes the priority, for example through support agreements, contingency planning, or alternative solutions where possible.
Office supplies are usually routine products. They are easy to source, widely available, and have limited strategic impact. Here, the greatest benefit comes from efficiency. Standard suppliers, catalog agreements, and automated ordering processes help reduce administrative effort and save time.
This example shows why the Kraljic matrix remains useful in practice. It helps organizations stop looking at procurement as one broad activity and start making sharper choices per category. That leads to better priorities, more suitable supplier strategies, and a stronger balance between cost, continuity, and efficiency.
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 article 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 25, 2026
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