Kraljic’ matrix – part 1

Kraljic’ matrix – part 1

Transcript

Hi everyone, I’m here to kick off a series of tips that I hope you find helpful.

Over the coming period, I’ll share the ins and outs of the number one tool that professional buyers use in their jobs. For you as a sales professional this will be a tremendous asset since it will answer the fundamental question why buyers behave the way they do.

The tool is called Kraljic’ Purchasing Portfolio Matrix. It was developed by Peter Kraljic in the early 1980s and even now, almost 40 years later, it is still widely used by buyers around the world.

The first step is to make 2 relatively simple assessments:

A buyer’s first step is to look at “financial impact”. This describes the impact of a supply item upon the bottom line. You can choose either high or low. An example of high financial impact could be cocoa for a chocolate company. An example of low financial impact could be office cleaning services for that exact same company.

Secondly, buyer’s look at “supply risk”. This describes the risk of that specific item on the buyer’s supply chain. This can be considered high when the item is a scarce raw material, when its availability could be affected by government instability or when there are few suppliers. Supply risk is low when it’s easily available on the market.

When combining financial impact with supply risk, this generates 4 different options. Each option represents a different buyer-supplier relationship and therefore suggests a different sourcing strategy.

Over the next couple of weeks, I’ll cover each of these 4 options in more detail and, more importantly, help you understand why buyers behave the way they do and how this helps you as a sales professional. I promise it’s going to be insightful.

Happy negotiations everyone!