Unlocking the Power of Kraljic Matrix: New Dimensions for Strategic Sourcing

The Kraljic matrix is still an excellent procurement tool, yet somewhat simplistic. 

Its two dimensions suggest the flat Earth approach with insufficient room to cater to the complexities of modern category management and strategic sourcing situations. 

This article proposes an elegant scenario, which we applied to add new dimensions to the Kraljic matrix.  

The Strategic Sourcing Matrix

Let's start with the classical view, the adapted Strategic Sourcing matrix.


Naturally, we end up with four basic scenarios. The strategic implications of each are presented in the picture.

Indeed, we understand that leverage items attract negotiations, while non-critical ones are about sourcing process efficiency, buying channels, etc. 

But what about the difference between direct commodities and IT end-user equipment. Won't you be negotiating both but differently? 

What if you need to produce a large batch of branded products for a single marketing campaign instead of recurring collections of traditional products for the mass market. You will be souring direct materials differently then.

New dimensions of the category analysis

Therefore, let's suggest additional dimensions of category analysis.

Type of product

Direct materials constitute the final product. Indirect ones support the production and operational processes. 

Buyers of direct materials will empathize with the availability and quality of an item rather than the price itself. Category strategy will elaborate on logistical and supply management aspects, i.e., inventory planning and supply chain configuration. 

Indirect materials are more about cost excellence. 

By the way, procurement savings on direct categories improve the COGS, while indirect savings optimize Opex.

Type of demand

One may need to source an item for the given project, while the same can be sourced repeatedly for recurring needs. 

Project procurement should be fast! The sooner the final deliverables hit the market, the more revenue a company generates. There's little need to engage in category management activities, then. Your planning horizon is limited by the scope and timelines of the projects – there's no thinking about long-term strategic value.  

Steady demand will be satisfied by frame agreements, and projects tend to conclude single-batch contracts. Technical specifications are standard ones, while projects deal with custom requirements.  

Buyclasses (from Buygrid theory)

We already covered the Buygrid theory in this post.
From that, we will use three buyclasses:
1.     Straight rebuy – same products and specifications, likely the same vendors. Great opportunity for e-auctions to source and e-catalogs to order. 
2.     Modified rebuy – usual products with some technical modifications. You will leverage the existing supply base and elaborate on cost engineering to negotiate effectively.
3.     New task – all new products with new specs and no established supply base. This case is about supplier innovations, agile methodology, crowdsourcing, etc.   

The combination of Kraljic or strategic sourcing matrix and three additional dimensions specified above give us up to 48 scenarios for category strategy development. 

Most importantly, additional vantage points allow us to look at familiar objects from unique perspectives. 

Example of Kraljic and Buyclass combination

We took a simple example of a generic IT category. We distributed all major sub-categories (e.g., Software, Security, Cloud, Telco, etc.) among Kraljic matrix quadrants.

Naturally, Software would fit the Strategic quadrant due to high spend, business importance, and high risks associated with operational disruptions.

However, with buyclasses, we can go one step further in the granularity of our analysis.

Straight rebuy would represent the commoditized software your company uses yearly. The spend is high, but we can place this sub-category into the Leverage quadrant due to stable and predictable demand and possibly the competitive supply base (unless we're talking monopolistic items like Office 365 licenses.)

Similarly, we can retain the modified rebuy Software as the Strategic and relatively small-value but high-risk new buy Software - into Bottleneck. 

Each cluster will have different category strategies and sourcing processes, so we enrich the legacy one-size-fits-all approach to the Software category.     
Kraljic Matrix extended with Buyclasses

Selection of the type of sourcing event based on Buy Classes.


We suggest the following bespoke tool to select the type of sourcing event.

Sourcing event selection tool






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More information on this and other exciting topics can be found in "The Technology Procurement Handbook." It represents 23 years of experience, billions of dollars worth of successful sourcing projects, and 1000s of hours spent on research, analysis, and content creation for the most demanding professional readers.
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