Kraljic Matrix

MATRIX:
IMPLEMENTATI
ON IN
AUTOMOBILE
INDUSTRY.
PRESENTED BY:
ROHIT PANT.
500077132.
 History
 Introduction
 How to Use the tool
 Step 1: Purchase Classification
 Leverage Products
 Strategic Items
 Bottleneck Items
 Non-Critical Items
 Step 2: Market Analysis
 Step 3: Strategic Planning
 Step 4: Action Plans
 Three Planning Strategies.
 What’s the score.
 Performance Score
 The Right Quadrants.
 Usage
 References.
HISTORY
 The Kraljic Portfolio Purchasing Model was
created by Peter Kraljic.
 First
appeared in Harvard Business Review in
1983.
 Despite Dr. Peter

its age, it's a popular and useful modelKraljic
used in companies worldwide.
Introduction.
 The Kraljic Matrix is an influential strategic tool “to guide
managers so that they can recognize the weakness of
their organization and formulate strategies for guarding
against supplies disruption”.
 The Kraljic Matrix helps us develop a purchasing strategy

for the products and services our organization consumes.
 In doing so, procurement moves from being a

transactional activity to a strategic activity – because, as
Kraljic said, "purchasing must become supply
management."
How to Use the
Tool??
Purchase
classification
.
The model involves Market

analysis.
four steps:
Strategic
positioning.
Action
planning.
STEP 1: PURCHASE
CLASSIFICATION
 Start by classifying all of the commodities, components,
products, and services that you buy according to the
supply risk and potential profit impact of each.
 Supply risk is high when the item is a scarce raw material,

when its availability could be affected by government
instability or natural disasters, when delivery logistics are
difficult and could easily be disrupted, or when there are
few suppliers.
 Profit impact is high when the item adds significant value

to the organization's output. This could be because it
makes up a high proportion of the output.
 Leverage items (high profit  Strategic items (high profit
impact, low supply risk). impact, high supply risk).
 Purchasing approaches to  These items deserve the most

consider here include using attention from purchasing
your full purchasing power, managers. Options include
substituting products or developing long-term supply
suppliers, and placing high- relationships, analyzing and
volume orders. managing risks regularly, planning
for contingencies, and considering
making the item in-house rather
than buying it, if appropriate.
 Bottleneck items (low  Non-critical
profit impact, high items (low profit
supply risk). impact, low supply
risk).
 Useful approaches here include
over ordering when the item is
available (lack of reliable  Purchasing approaches for
availability is one of the most
common reasons that supply is
these items include using
unreliable), and looking for ways to standardized products,
control vendors. monitoring and/or optimizing
order volume, and optimizing
inventory levels.
Step 2: Market Analysis
 Here, you investigate how much power your suppliers

have, and how much buying power you have as their
customer. A good way of doing this is to use Porter's
Five Forces analysis.
Step 3: Strategic
Positioning
Classify the products or

materials you identified as
"strategic" in Step 1 according
to the supplier and buyer
power analysis you did in Step
2. To do this, simply enter each
item in the purchasing portfolio
matrix
Step 4: Action Plans
 Finally, develop action plans for each of the products and
materials you need on a regular basis according to where those
items are placed in the matrix
Three purchasing strategies
Exploit Balance Diversify
Make the most of your high Take a middle path Reduce the supply risks by
buying power to secure good between the seeking alternative
prices and long-term contracts exploitation suppliers or alternative
from a number of suppliers, so approach and the products.
that you can reduce the supply diversification
risk involved in these important approach For example, in our
items. logistics example, could
you use the railroad to
You may also be able to make ship some of your
"spot purchases" of individual overland freight instead of
batches of the item, if a relying solely on trucking
particular supplier offers you a companies?
good deal.
The only real caution is not to
take any aggressive approach
too far, just in case
circumstances change.
WHAT’s THE SCORE???
This is the normalized preference scores of 10

procurement experts regarding supply risk and
profit impact.
Performance Score of Selected
Automotive Components
Average Supply Risk Average profit Risk
Critic
How do you rater the Impa ality Cost/
item based on supply Weig Glob ct on of Value Weig Glob
risk and profit impact Mark Perfor Com hted al Profit the of hted al
criteria on a scale of et mance plexit Avera Aver abilit purch Purch Avera Aver
1 - 10? Risk Risk y Risk ge age y ase ase ge age
Fuel Supply System 2.4 7.8 9.6 5.79 2.9 9.8 9 9.6 9.46 4.73
Engine Components 2.6 7.6 9.1 5.76 2.88 9.2 9 9.8 9.14 4.57
Audio/Video Devices 4.2 2.1 2.1 3.03 1.5 2 3.6 2 2.18 1.09
Gauges and Meters 3.2 2.4 2.4 2.75 1.38 4.6 3.8 3.8 4 2
Carburetor 1.8 2 1.4 1.79 0.9 2 2.8 3.2 2.79 1.4
THE RIGHT QUADRANTS
The Proposed process maps the

automotive items into different
quadrants of Kraljic’s portfolio
matrix.
HOW KRALJIC BE IMPLEMENTED IN
AUTOMOBILE INDUSTRY?
USAGES OF KRALJIC MATRIX
 Analyse purchasing portfolio

 Decision tool for a purchasing department or a
purchase to define priorities
 Decision tool on strategy to follow for a product or
product category
 Outsourcing of non critical items and Leverage items
https://www.youtube.com/watch?v=l

hVkDFtfwxw
REFERENCES
 https://
www.sps.nhs.uk/wp-content/uploads/2016/08/Day-2-Andi-9-Com
mercial-Relationships.ppt
 https://www.mindtools.com/pages/article/newSTR_49.htm
 https://expertprogrammanagement.com/2011/08/the-kraljic-matri
x
/
 http://www.logforum.net/vol1/issue1/no3/3_1_1_05.html
 https://
autotechreview.com/features/vehicle-cutaways/who-supplies-wha
t-to-the-maruti-suzuki-dzire

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MATRIX:

 Despite Dr. Peter

 The Kraljic Matrix helps us develop a purchasing strategy

 In doing so, procurement moves from being a

The model involves Market

 Supply risk is high when the item is a scarce raw material,

 Profit impact is high when the item adds significant value

 Purchasing approaches to  These items deserve the most

 Here, you investigate how much power your suppliers

Classify the products or

This is the normalized preference scores of 10

The Proposed process maps the

 Analyse purchasing portfolio

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