What is Kraljic Matrix? Definition, Model & Example

We will explain what the Kraljic Matrix or the supply chain portfolio matrix is and how to use 7 Kraljic Models to improve various functions across the supply chain.

What is the Kraljic Matrix?

Kraljic Matrix, also known as Purchasing Portfolio Matrix or Supply Chain Portfolio Matrix, is a method developed by Peter Kraljic in 1983. It is used to create a purchasing portfolio by segmenting items (products or inventory or services) into 4 dimensions. The result is that purchasing professionals can prioritize buying activities based on profit impact and level of risks involved.

Over the years, the Kraljic model was extended and other dimensions are used to segment various issues under the supply chain environment. More examples can be found in the following sections.

Demand Profiling Matrix

Demand profiling is the method presented by Dr. Janet Godsell in the article named "The Power of Supply Chain Segmentation". It incorporates various concepts and can be used to manage the demand side of the supply chain. Example of Demand profiling matrix is as below,


As you can see, it looks like the Kraljic matrix as a demand planner. There is a specific procedure to follow for this type of analysis (it needs some statistical analysis as found in six sigma program.) But the quick and easy way is to sort product by volume and use the level of forecast error (MAPE or MAD) to determine the level of variability then put everything into a quadrant. I'm so very sure that most demand planners will choose to attack high variability items in quadrant I and II.

Fisher's Matrix for Product/Strategy

Fisher's supply chain matrix is from the paper on Harvard Business Review by Marshall L. Fisher in 1997 called "What's the right supply chain for your products". Long story short, he said that there are 2 types of products, functional and innovative. Then he proposed what kind of operations strategy a company should use for each type of product.


It sounds simple, but lots of supply chain management practitioners can't break away from one size fits all mindset. For example, if you still select a supplier based on the lowest cost, no matter how long the lead time is, no matter how raw material will be used, you really need this matrix.

Global Supply Chain Matrix

In the paper "A Taxonomy for Selecting Global Supply Chain Strategies", Martin Christopher proposed the international business strategy based on the demand and lead-time characteristics as below,



This matrix is based on the lean manufacturing concept. It looks very simple but can be very effective if it's applied properly.

Supply Chain Risk Mapping

One of the most popular supply chain risk case studies is "Ericsson's serious sub-supplier accident". This paper explains the concept of risk mapping as below,


Before using this kraljic matrix, you need to identify the type of risk related to your supply chain. MIT Global Scale Risk can be the starting point. After that, you need to determine the priority of each type of risk-based on business impact and probability. The red zone is very clear, you need to mitigate risks in this quadrant ASAP. Green zone can wait. Anyway, the yellow zone can be different from one organization to the other. You need to create the agreed plan of what to do with the yellow zone.

Customer Window Quadrant

Lots of paper in supply chain management mentions that Intel Corporation uses the technique called "Customer Window Quadrant" to classify customer service and customer satisfaction based on the level of Satisfaction and Importance.


Supply Chain Security Matrix

The world is more complex than it used to be and the security has become the new burden for every trading partner in the supply chain. In order to avoid potential delay from security screening, a supply chain security project is necessary. In 2007, World Customs Journal published the paper called "Voluntary Supply Chain Security Program Impacts: An Empirical Study with BASC Member Companies". Again, a 2x2 Matrix has been used to prioritize various security measures in terms of cost and effectiveness.

Do you think this is a good collection of Kraljic Matrix?


References
- Kraljic, P. (1983). Purchasing must become supply management. Harvard business review, 61(5), 109-117.

- Godsell, J. (2012). Thriving in a turbulent world: The power of supply chain segmentation.

- Marshall, L. F. (1997). What is the right supply chain for your product? A simple framework can help you figure out the answer. Harvard Business Review, 3, 105-116.

- Christopher, M., Peck, H., & Towill, D. (2006). A taxonomy for selecting global supply chain strategies. The International Journal of Logistics Management, 17(2), 277-287.

- Norrman, A., & Jansson, U. (2004). Ericsson's proactive supply chain risk management approach after a serious sub-supplier accident. International journal of physical distribution & logistics management, 34(5), 434-456.

- Intel Corporation. (1997). Customer window quadrant.

- GutiƩrrez, X., Hintsa, J., Wieser, P., & Hameri, A. P. (2007). Voluntary supply chain security program impacts: an empirical study with BASC member companies. World Customs Journal, 1(2), 31-48.

All contents are written by Ben Benjabutr unless marked as [Guest Commentary]

About the Author and Editor:
Ben Benjabutr is the author and editor of SupplyChainOpz. He holds an M.Sc. in Logistics Management with 10+ years of experience in supply chain management. You can connect with Ben via Twitter, and Quora or drop him a line via e-mail.