Kraljic Portfolio Purchasing Model
The Kraljic Matrix sorts everything you buy by supply risk and profit impact, so you stop treating a critical single-source component the same way you treat paperclips.
One axis measures how risky supply is, the other how much profit is at stake, splitting purchases into four groups.
Reach for this when…
- A single supplier failure would stop production and nobody has a backup plan.
- Procurement time is spent equally on big and trivial purchases.
- You're renegotiating supplier contracts and need to know where you actually have leverage.
How to run it
- List every product or service category you purchase.
- Score each on supply risk: availability, number of suppliers, substitutability.
- Score each on profit impact: spend, effect on product quality or cost.
- Plot into four quadrants: Strategic, Leverage, Bottleneck, Non-critical.
- Set a buying strategy per quadrant: partner, negotiate hard, secure supply, simplify ordering.
A worked example
Situation. Chen Wei-Ming buys components for Chen Precision Parts, an automotive parts manufacturer near Taichung, Taiwan, and had never formally mapped his supplier risk.
Applied. Plotting the purchase list, a rare-earth magnet came out as Strategic: high spend, single source, long lead time. A common fastener sat as Bottleneck: cheap, but only one approved supplier. Both had been managed with the same routine purchase order process as everything else.
Result. He qualified a second supplier for the magnet before the first one had a capacity problem, and moved the fasteners onto a simplified standing order. The near-miss never became a stoppage.
The catch
The two axes are judgement calls, not measurements, and teams often disagree on where an item sits - run the exercise with procurement and operations in the room together, not procurement alone. It's also a snapshot: a Leverage item can become a Bottleneck overnight if a supplier exits the market.
A Bottleneck item is dangerous precisely because it looks unimportant on spend alone - profit impact is not the only axis that matters.
Origin: Peter Kraljic