In a landscape increasingly influenced by artificial intelligence and evolving supply chain dynamics, the procurement sector finds itself at a critical juncture. The rise of agentic approaches—the term adopted widely in corporate discussions—highlights a shift towards more strategic supplier relationships. This trend has been largely influenced by historical frameworks, such as the Kraljic Matrix, which has been foundational in shaping procurement strategies since its introduction by Peter Kraljic in the early 1980s.
Initially presented in the Harvard Business Review as a call for purchasing departments to adopt a supply management focus, the Kraljic Matrix segments suppliers into four distinct categories: non-critical items, leverage items, bottleneck items, and strategic items. Each of these categories requires tailored management strategies based on the perceived supply risk and profit impact. Despite its enduring popularity, recent conversations among industry leaders suggest that while the Kraljic Matrix has served its purpose, it may now be in need of an overhaul to reflect contemporary market complexities.
During a recent dialogue among Procurement Leaders’ SRM & Innovation cohort, a leader from a consumer goods company shared insights on an evolved approach to supplier segmentation. Their revised framework not only enhances supplier management strategies but also better captures the dynamics of modern supplier relationships. This transformative method discards the traditional segmentation in favour of two axes: the level of engagement with suppliers and their capacity to drive commercial growth through efficiency, agility, and innovation potential. By focusing on these elements, the company segments suppliers into the quadrants of transactional, essential, visionary, and strategic.
This shift in focus allows organisations to invest time and resources judiciously, directing human interaction and collaborative efforts towards suppliers identified as critical to achieving strategic goals. The move towards an updated segmentation framework reflects a broader recognition that simply categorising suppliers for risk management is insufficient for leveraging the full spectrum of their capabilities. As companies continue to navigate a complex global supply chain, understanding the unique value offered by each supplier—beyond mere transactional relationships—becomes imperative.
The Kraljic Matrix has undeniably provided a robust foundation for procurement strategies over the years. Yet, the advent of new methodologies integrating elements of relationship management suggests a need for evolution. A recent research article proposed a novel strategy segmentation methodology that combines the Kraljic Portfolio Matrix with the Supplier Relationship Model. This innovative approach aims to create a comprehensive supplier classification system that acknowledges supplier capabilities and performance while emphasising the importance of relationship strength in formulating effective procurement strategies.
As procurement leaders contemplate the future, they must consider whether traditional frameworks adequately address the multifaceted challenges posed by current supply chain realities. The landscape is shifting towards a more nuanced understanding of supplier segmentation—one that not only optimises procurement processes but also fosters deeper partnerships that can drive long-term success. An enhanced segmentation framework fit for 2025 could ultimately serve as a catalyst for organisations looking to maximise value in their supply chains, blending age-old principles with modern insights to cultivate a more agile and responsive procurement strategy.
To stay informed about the latest developments in procurement and to receive insights from the industry community, signing up for updates such as the CPO Crunch newsletter may provide valuable perspectives. As the field evolves, continuous learning and adaptation will be key to navigating the complexities of supplier management in the years to come.
Reference Map
- Article summarising the Kraljic Matrix and its historical significance.
- Detailed explanation of the Kraljic Matrix.
- Overview of the application of the Kraljic Matrix in supplier segmenting and risk management.
- Definition and purpose of supplier segmentation.
- Insights from recent research on integrating procurement strategies.
- Recommended frameworks for effectively managing supplier relationships.
Source: Noah Wire Services
