Running a business without an effective purchasing policy can be difficult, in some cases, even impossible. For this reason, it is essential to have tools that allow you to correctly plan the strategies that will be used in purchasing management. One of the most implemented is the Kraljic matrix, which allows us to classify better all the materials and even services that will be purchased, taking into account all the risks that the company may face and its consequences have on results.
If you want to know what the Kraljic matrix is and what it consists of, continue reading this post, here we will tell you how you should use it correctly.
What is the Kraljic matrix?
It is a strategy that allows companies to analyze their suppliers within the purchasing area efficiently. Some consider it as a key model for a company to emerge.
Therefore, this greatly benefits those who use it, since it enables savings to be made when purchasing materials, making substitutions feasible, as well as the existence of cooperation with the company’s strategies.
Being a system that is based on the function of cost and the strategic need that a company goes through when dealing with different resource providers, it studies the possibilities of negotiating the prices that they impose, changing providers, or directly ensuring a stable relationship with these.
This tool helps to purchase managers within companies to holistically assess each of the suppliers’ position and the importance they can represent within the company.
Thanks to this concept, currently, the strategic vision with which purchases and suppliers are managed is much clearer, and a conclusion can be reached quickly and easily.
The functioning of the Kraljic matrix
It is important to know what the essential operation of this type of tool is. In this way, it can be better understood, and it is perfectly known in which situations it can be put into practice.
In terms of function, this process values two dimensions in particular, which are:
This is located on the horizontal axis of the matrix and is classified from lowest to highest risk.
Impact of results
It is located on the vertical axis of the matrix, and just in the highest part, you will find all the products or services that have been contracted and that have a high impact within the strategic value.
Based on the supply and demand that each of these products and services may have, financial costs can be defined in 4 different strategies:
How to use the Kraljic matrix?
Knowing the theory, it is quite easy to know exactly what to do; however, knowing precisely what are the steps to be followed to use the kraljic matrix correctly is convenient.
Making and implementing a kraljic matrix can be one of the best decisions made within the company.