Kraljic’ matrix – Strategic

Kraljic’ matrix – Strategic

Transcript

Hi everyone, I’m back with part five of Kraljic’ purchasing portfolio matrix. If you haven’t been following along, you’re going to have to go back and binge a couple of great sales tips from the last couple of weeks. So far, we’ve covered the framework as well as 3 of the 4 quadrants of the matrix.

Today, we’ll cover the 4th and final quadrant: “Strategic items”

When we have a high supplier risk and high profit impact items, we talk about strategic items. An example of this could be a patented material a buyer needs to source that is absolutely critical to their product. They basically have nowhere else to go and without it, They would not be able to sell their products anymore impacting profits significantly.

The purchasing approach for a buyer would be to form a strategic alliance with this particular supplier. This means looking at both product and process innovation as well as agreeing on a long-term commitment that is mutually beneficial.

These types of relationships consume a lot of a buyer’s time and they require a very specific skillset, because connections need to be built at every level in both organisations.

So, what does his mean for you as a sales professional?

Well, firstly, you have finally secured the attention of a buyer. Well done!

Secondly, an immediate thought could be to exploit the situation considering the customer is dependent on you. However, be careful here. Since the product or service you provide is so critical to the operating model of the customer, you could easily push them into bankruptcy if you overplay your hand. And that probably isn’t your intention neither.

Instead, by intensifying co-operation, you can build a sustainable long-term business model that is valuable to the both of you. If you make sure the buyer doesn’t want to go somewhere else, you have no risk at all losing this business now or in the future.

A word of caution is that most companies don’t have a lot of items in the strategic category. If they would, they would have run into serious issues by now, so don’t assume too quickly you’re in the strategic category.

That’s it for Kraljic’ purchasing portfolio matrix. Hopefully it will benefit your current and future dealings with buyers.

Happy negotiations everyone!