SRCSourcing & procurementStop 2 of 9
Kraljic matrix & category strategy
Sorting what you buy by profit impact and supply risk, so each category gets the right buying strategy.
Read atChange any time
Not everything a company buys deserves the same treatment. Peter Kraljic’s 1983 matrix sorts purchases on two questions:
- Profit impact: how much money flows through this category, and how much it affects product cost and quality?
- Supply risk: how hard is it to get: few suppliers, scarce materials, long lead times, specialist know-how?
That gives four boxes, each with its own strategy:
| Low supply risk | High supply risk | |
|---|---|---|
| High profit impact | Leverage (standard packaging, common chemicals): many suppliers, so compete them through tenders and auctions, consolidate volume and negotiate hard | Strategic (a key active ingredient, an advanced chip): build long-term partnerships, plan jointly, share forecasts and manage risk together |
| Low profit impact | Non-critical (office supplies, cleaning materials): automate buying with catalogues and purchasing cards and spend as little effort as possible | Bottleneck (a special spare part from one source): secure supply with safety stock, backup suppliers or redesign to remove the dependency |
The common mistake is using one approach everywhere: hammering a strategic supplier on price can damage a relationship you depend on, while building partnerships for office paper wastes time. Categories also move between boxes, for example when a single-source supplier gets a competitor, or when a commodity suddenly becomes scarce.
Words to use
- Category strategy
- A plan for how to buy a group of similar items: suppliers, contracts, terms and risk.
- Leverage item
- High spend, many suppliers: use buying power through competition.
- Bottleneck item
- Low spend but hard to source: protect continuity first.
Scoring the two axes
Profit impact combines measures such as:
- annual spend and its share of product cost,
- the category’s effect on product quality or differentiation,
- how much a price change would move margins.
Supply risk combines:
- the number of qualified suppliers and how concentrated the market is,
- the time and cost to switch,
- availability of substitutes,
- lead times, and geographic or political exposure.
Score each on a common scale (say 1 to 10), with written definitions so different buyers score the same way.
| Category | Profit impact | Supply risk | Quadrant |
|---|---|---|---|
| Laminated packaging film | 8 | 3 | Leverage |
| Outbound road freight | 7 | 4 | Leverage |
| Patented active ingredient | 8 | 8 | Strategic |
| Special filler-machine bearing | 2 | 8 | Bottleneck |
| Office supplies | 1 | 1 | Non-critical |
Tactics by quadrant
| Quadrant | Goal | Tactics |
|---|---|---|
| Leverage | Lowest total cost | Tenders and auctions, volume consolidation, shorter contracts, index-linked prices |
| Strategic | Secure supply and joint value | Long-term agreements, joint planning, shared forecasts, co-development, executive relationships |
| Bottleneck | Continuity | Safety stock, alternative suppliers, standardizing the specification, long-term supply agreements |
| Non-critical | Low process cost | Catalogues, purchasing cards, bundling under one supplier, automation |
Who has the power?
Kraljic’s method also asks about the balance of power inside each quadrant. A strategic category where you are a big customer to the supplier is different from one where you are a small account. With buyer power, you can exploit it (push price and terms); when it is balanced, you balance it (partner); with supplier power, you diversify (develop alternatives, redesign).
Moving a category, not just managing it
The best category strategies change the category’s position:
- Bottleneck to non-critical: replace a special part with a standard one available from many suppliers.
- Strategic to leverage: develop or qualify new suppliers, or redesign to remove a proprietary input.
- Leverage to strategic, deliberately: concentrate volume with a partner in exchange for innovation or priority capacity.
How suppliers see you
The supplier’s view matters as much as yours. Supplier preferencing models (described by Steele and Court) classify customers by the account’s value to the supplier and how attractive it is to serve. A supplier treats a large, attractive customer as core and protects it; a small, difficult account may be exploited or quietly dropped when capacity is short. A buyer that is “strategic” to its supplier but a nuisance account in return should expect weaker priority in a shortage.
When the matrix oversimplifies
Gelderman and van Weele (2005) review common criticisms:
- Two dimensions hide many factors, and the scoring can be subjective.
- Categories contain items with very different risks.
- Interdependence between buyer and supplier, and long-term relationships, aren’t captured well.
The matrix is a starting point for a conversation, not a calculation that decides strategy on its own.
Positions change with the market
In 2021, semiconductors for cars looked like leverage or non-critical items for many buyers: cheap per unit, bought through tier 1 suppliers. The shortage turned them into bottleneck or strategic items overnight, and car makers that had treated them transactionally lost production. Re-assessing supply risk regularly, especially for low-spend inputs with concentrated supply, is part of the method.
Interview kit
Practise it out loud
Answer each question yourself before opening the model answer.
The Kraljic matrix classifies purchases by profit impact and supply risk. Leverage items are high-impact, low-risk, so we use competition and volume. Strategic items are high-impact, high-risk, so we build partnerships and joint planning. Bottleneck items are low-impact but risky, so we secure supply with stock, backups or redesign. Non-critical items get automated, low-effort buying. Each category gets the strategy that fits, and the classification is reviewed as markets change.
A component costs little but has only one qualified supplier. Which quadrant, and what would you do?
Bottleneck. The priority is continuity, not price: hold safety stock, qualify a second supplier, sign longer agreements to secure capacity, or redesign the product to use a standard part.
Why not run reverse auctions for every category?
Auctions work for leverage items with many capable suppliers and clear specifications. For strategic items they can damage relationships, cut supplier investment and raise risk; for bottleneck items there may be no competition to exploit.
Connected stops
Where this idea feeds in, or gets its inputs from.
Sources and further reading
- Kraljic, P. (1983). Purchasing must become supply management. Harvard Business Review, 61(5), 109–117.
- Van Weele, A. J. Purchasing and Supply Chain Management. Cengage Learning.
- Gelderman, C. J., & van Weele, A. J. (2005). Purchasing portfolio models: A critique and update. Journal of Supply Chain Management, 41(3), 19–28.
- Steele, P. T., & Court, B. H. (1996). Profitable Purchasing Strategies: A Manager's Guide for Improving Organizational Competitiveness through the Skills of Purchasing. McGraw-Hill.