In the evolving landscape of procurement, the Kraljic Matrix continues to be a cornerstone for segmenting suppliers and guiding strategic sourcing decisions. However, as the business environment shifts, so too must the methodologies we employ. A recent discussion among members of the Procurement Leaders’ SRM & Innovation cohort highlighted this need for evolution. It recalled the origins of the Kraljic Matrix, conceptualised in 1983 by Peter Kraljic in his influential Harvard Business Review article, “Purchasing must become supply management.” Kraljic’s work was groundbreaking in its time, segmenting suppliers into four distinct categories based on the levels of supply risk and profit impact: Non-critical, Leverage, Bottleneck, and Strategic.
Yet, the original framework is being scrutinised as organisations increasingly recognise the need for more nuanced strategies in managing supplier relationships. For instance, in a recent conversation, a leader in risk management from a consumer goods company discussed an enhanced approach to supplier segmentation that goes beyond Kraljic’s traditional categories. This new method not only focuses on the reliability and profitability of suppliers but also emphasises leveraging critical supplier capabilities to maximise overall value.
By adopting two matrices that assess both the level of engagement with suppliers and their ability to drive commercial growth, the company has shifted its segmentation from the established Kraljic framework to a more modern categorisation: Transactional, Essential, Visionary, and Strategic. This adaptation underscores the importance of human interaction and collaboration in nurturing supplier relationships, contrasting with the notion that some suppliers can be managed autonomously by agents.
The call for adaptation does not merely stem from preferences but reflects a growing consensus about the limitations of the Kraljic Matrix itself. A novel strategy segmentation methodology (SSM) recently presented integrates Kraljic’s framework with the Supplier Relationship Model (SRM). A case study within the machinery sector demonstrated that this combined approach could enhance supplier management by considering not just procurement items but also actual supplier capabilities and the dynamics of supplier-buyer relationships. In this instance, the firm even decided to sever ties with six of its suppliers based on the insights gleaned from the segmentation analysis.
The significance of this evolution is further supported by broader literature on the Kraljic Matrix. Many sources reinforce its utility in categorising suppliers and guiding procurement strategies. However, they also share a growing recognition of the need to account for qualitative elements, such as supplier characteristics and the strength of relationships, which can profoundly influence procurement outcomes.
In light of these developments, organisations must reassess how they allocate time and resources to develop deeper relationships with suppliers deemed essential for long-term success. It is increasingly clear that in 2025 and beyond, adopting a segmentation framework that aligns with contemporary realities of supplier interaction and value addition will be crucial for achieving resilient supply chains.
With ongoing discourse around these methodologies, it is evident that the procurement landscape is ripe for innovation and rethinking established frameworks. Thus, those involved in supplier management are encouraged to reflect on their current approaches and consider how they can proactively adapt to remain competitive in an ever-evolving marketplace.
In conclusion, the journey towards a more sophisticated and responsive supplier segmentation strategy begins with recognising that the Kraljic Matrix, while foundational, is no longer sufficient on its own for navigating today’s complex business challenges.
Reference Map
- Lead article
- Article on novel strategy segmentation methodology
- Overview of the Kraljic Matrix
- Supplier segmentation strategies
- Detailed explanation of the Kraljic Matrix
- Definition of supplier segmentation
- In-depth exploration of the Kraljic Matrix
Source: Noah Wire Services
Subscribe to Industry Updates
