Purchaing strategies in the kraljic matrix

Although these products are low impact and have an abundant supply, they are nevertheless interesting, because the cost of handling them can often outweigh the cost of the product itself.

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Supply risk This is also defined from high to low. It aims to remove supply vulnerability as much as possible and maximize our potential buying power.

kraljic matrix bottleneck examples

Figure 2 — Purchasing Portfolio Matrix Step 4: Action Plans Finally, develop action plans for each of the products and materials you need on a regular basis according to where those items are placed in the matrix in figure 2.

By concluding good framework agreements and drawing up targeted pricing, the relationship between the company and the supplier continues to be in harmony. Step 3: Strategic Positioning Classify the products or materials you identified as "strategic" in Step 1 according to the supplier and buyer power analysis you did in Step 2.

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kraljic matrix product examples

This quadrant normally contains high-value items such as precious metals with limited, or even a single supplier.

Bottleneck items low profit impact, high supply risk. The Kraljic matrix helps us in the first step of supplier management — identifying important suppliers. Bottleneck items Low profit impact and high supply risk These items do not represent a high value but they are a vulnerable factor in the entire supply chain.

Strategic sourcing matrix

Non-critical items Low profit impact and low supply risk These types of products cause the least problems with respect to purchasing performance. Step 1: Purchase Classification Start by classifying all of the commodities, components, products, and services that you buy according to the supply risk and potential profit impact of each. Useful approaches here include overordering when the item is available lack of reliable availability is one of the most common reasons that supply is unreliable , and looking for ways to control vendors Non-critical items low profit impact, low supply risk. Figure 2 — Purchasing Portfolio Matrix Step 4: Action Plans Finally, develop action plans for each of the products and materials you need on a regular basis according to where those items are placed in the matrix in figure 2. These are products that are essential for the production process but they are difficult to obtain. Supply risk is high when the item is a scarce raw material, when its availability could be affected by government instability or natural disasters, when delivery logistics are difficult and could easily be disrupted, or when there are few suppliers. Kraljic, P. Implement and monitor strategy This step-by-step makes it easier to control stock management. This enables us to see which relationships are important so we can focus on strengthing these, as well as identifying less important relationships where we might employ traditional supplier management techniques such as offshoring. There may be a balance of power between the company and the supplier, but when this supplier ceases to deliver, purchasing stagnates. What is the Kraljic portfolio purchasing model? Spreading Using the Kraljic portfolio purchasing model, an organization can professionalize and improve its purchasing performance which may produce considerable cost savings. This prevents obsolescent stock and excess supplies and this leads to cost reduction.

The Kraljic Matrix allows us to work in a smarter way with those suppliers we already have. In that case, discussions must be had with the supplier and new supply terms and conditions should be drawn up.

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The Kraljic Portfolio Purchasing Model