Supplier segmentation helps procurement teams avoid managing every supplier in the same way. The Kraljic Matrix is a practical portfolio framework that groups suppliers or purchase categories according to two dimensions: supply risk and business impact.
The Two Kraljic Dimensions
| Dimension | Questions to Consider |
|---|---|
| Supply Risk | How many qualified alternatives exist? Is the item single-source? How difficult is switching? Are lead time, capacity, geography, technology or regulation creating dependency? |
| Business Impact | How important is the category to cost, revenue, customer service, production continuity, quality or safety? |
SCMANA’s practical workbook uses a simple 1–5 score for each dimension. A score of 1 represents low risk or low impact; 5 represents high risk or high impact. The thresholds are editable.
The Four Kraljic Quadrants
| Quadrant | Typical Situation | Practical Sourcing Approach |
|---|---|---|
| Strategic | High supply risk and high business impact | Build long-term relationships, joint planning, senior governance, risk mitigation and supplier development. |
| Leverage | Low supply risk and high business impact | Use competition, consolidate spend, negotiate strongly, tender regularly and exploit purchasing scale. |
| Bottleneck | High supply risk and lower business impact | Protect continuity through safety stock, alternate-source qualification, redesign, substitution or contingency planning. |
| Non-Critical | Low supply risk and low business impact | Simplify transactions using catalogues, framework agreements, automation, purchasing cards or standard ordering. |
Simple Scoring Example
A single-source electronic component that is essential to production might score 5 for Supply Risk and 5 for Business Impact, placing it in the Strategic quadrant. Standard office supplies with many alternatives and limited operational impact might score 1 and 1, making them Non-Critical.
How to Use the Matrix
- List the supplier or purchase category.
- Record annual spend for context.
- Score supply risk from 1 to 5.
- Score business impact from 1 to 5.
- Review the automatically assigned quadrant.
- Compare the suggested sourcing approach with the realities of your market.
- Validate the segmentation with procurement, operations, technical and finance stakeholders before changing strategy.
Common Supplier-Segmentation Mistakes
- Using annual spend alone as the definition of strategic importance.
- Assuming a high-spend supplier is automatically Strategic.
- Ignoring sub-tier dependency, switching time or qualification constraints.
- Leaving suppliers permanently in one quadrant even when markets change.
- Using the framework as an automatic supplier rating rather than a discussion and strategy tool.
Download the Practical Workbook
The SCMANA Supplier Segmentation / Kraljic Matrix Workbook is designed for first-time users. Enter the supplier or category, annual spend, Supply Risk score and Business Impact score. The workbook automatically classifies the item as Strategic, Leverage, Bottleneck or Non-Critical and provides a recommended sourcing approach and key action.
Download the Supplier Segmentation / Kraljic Matrix Workbook (Excel)
Related SCMANA Guides
The Kraljic Matrix is a portfolio framework. Its value comes from disciplined cross-functional discussion about dependency and business impact, not from the numerical score alone.
