The Kraljic Matrix

What is the Kraljic Matrix?

The Kraljic Matrix is the most influential procurement framework in business history. Created by Peter Kraljic in his landmark 1983 Harvard Business Review article "Purchasing Must Become Supply Management," it revolutionized how companies think about supplier relationships and procurement strategy.

The matrix categorizes purchases into four quadrants based on two dimensions: Supply Risk (how vulnerable is the supply chain?) and Profit Impact (how much does this purchase affect the bottom line?). Each quadrant demands a completely different negotiation strategy.

The Four Quadrants

1. Non-Critical Items (Routine)

Characteristics: Abundant suppliers, low cost, minimal business impact (office supplies, janitorial services, basic components)

Procurement Strategy: Automate and simplify. Minimize time spent. Volume consolidation. Standard terms. E-procurement systems.

For Sellers: Win on convenience and price. Long sales cycles here are a red flag — if they're spending lots of time with you, your product is probably misclassified or you're overcomplicating it.

2. Leverage Items

Characteristics: High spend, many alternative suppliers, significant cost impact (raw materials, standard components, contract services)

Procurement Strategy: Exploit buying power through competitive bidding, contract negotiation, supplier switching. This is where procurement teams shine — and where sellers bleed margin.

For Sellers: Competitive battlefield. Differentiate or die. Value engineering matters. Price is negotiated hard. Long-term contracts protect you but reduce flexibility.

3. Bottleneck Items

Characteristics: Few suppliers, moderate cost, supply chain vulnerable (specialized parts, regional monopolies, niche services)

Procurement Strategy: Secure supply at reasonable cost. Safety stock. Backup suppliers. Accept less favorable terms to avoid disruption. Monitor supplier health closely.

For Sellers: Your advantage is supply scarcity, but don't abuse it — buyers will invest in alternatives if you squeeze too hard. Win through reliability and responsiveness, not price gouging.

4. Strategic Items

Characteristics: High spend, few suppliers, critical to operations (key technologies, mission-critical services, core materials)

Procurement Strategy: Deep partnerships. Co-investment in innovation. Long-term contracts with performance incentives. Supplier integration into product development. Risk sharing.

For Sellers: This is where the biggest deals live — and where trust matters more than price. Focus on strategic value, not tactical wins. Prove you're thinking about their business, not just the transaction.

Kraljic's 4-Step Implementation Process

1. Classification: Map all purchases to the matrix based on supply risk and profit impact
2. Market Analysis: Understand supplier power, market complexity, and your own buyer power for each category
3. Strategic Positioning: Determine ideal position in each market (exploit power vs. balance relationship)
4. Action Plans: Execute category-specific sourcing strategies and supplier management approaches

Power & Dependence Dynamics

Researchers Gelderman and Van Weele extended Kraljic's framework by examining the balance of power between buyers and suppliers. The matrix position influences who has leverage, but power dynamics shift over time based on:

• Market concentration (few suppliers = supplier power)
• Switching costs (high switching costs = current supplier power)
• Volume importance (your spend is 40% of supplier revenue = buyer power)
• Product substitutability (many alternatives = buyer power)
• Information asymmetry (who knows the market better?)

Key insight for sellers: Understanding power dynamics helps you position strategically. If you're in Leverage with weak power, expect brutal negotiations. If you're in Strategic with balanced power, partnership language works.

Known Limitations

The Kraljic Matrix is powerful, but not perfect. Modern procurement teams recognize these constraints:

• Static view: Doesn't account for rapid market changes or disruption (hello, 2020)
• Subjective scoring: "Supply risk" is interpreted differently across organizations
• Present-focused: Ignores future strategic importance or emerging technologies
• No ESG consideration: Published in 1983, before sustainability became a strategic priority
• Internal bias: Tends to reflect historical relationships rather than optimal strategy

Despite these limitations, the framework remains the foundation of modern procurement strategy. Most Fortune 500 companies use it or a derivative.

Why This Matters for Sellers

Here's the brutal truth: Most sellers don't know which quadrant they're in.

You pitch "partnership" to a Leverage buyer focused on price. You lead with price to a Strategic buyer evaluating reliability. You talk about your company's 50-year history to a Routine buyer who just wants a PO quickly.

Procurement professionals categorize you instantly. Your quote, your product, your positioning — they're mentally placing you in the matrix before you finish your pitch.

QuoteLens tells you which quadrant your quote will land in — before you send it.

Related Frameworks

Kraljic Matrix is just one lens procurement teams use. Combine it with other frameworks for complete analysis:

• Porter's Five Forces: Understand competitive dynamics and supplier market structure
• Supplier Preferencing Model: See how suppliers categorize their customers and what it means for your negotiating position