Kraljic’ matrix – Bottleneck

Kraljic’ matrix – Bottleneck


What’s going on Daily Sales Tips Community. I’m Mark Schenkius and I am back with part 4 of Kraljic’ purchasing portfolio matrix. So far, we’ve covered a high-level overview of the framework and we’ve talked in more detail about routine and leverage items. If you need to get caught up, check back in on tips #601, #608, and #615.

Today, we move to bottleneck items.

This quadrant is actually the flip side of leverage: risk is high, but profitability is low. Here, the strength is in your hands. The market consists of one or few suppliers that can behave monopolistically to force prices upward.

Even though these items have a limited impact upon company profitability, they still demand a high level of attention from buyers. And trust me, they don’t like to spend time here since all they do is manage risks and not deliver real monetary value which is usually what they think they’re paid for.

A great example of this is a small piece of specialist software. It’s difficult to source elsewhere however financial impact is typically low.

For buyers who are interested in changing the status quo, the strategic approach they could take is two-fold:

  1. to find or develop alternative suppliers or
  2. to simply their specification which essentially creates opportunities for other suppliers to step in.

The interesting bit is that buyers normally behave reactively as opposed to pro-actively with regards to bottleneck items. They tend to address issues here when they appear rather than deal with them up front. And that creates opportunities for you.

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

Well, in simple words, you have an opportunity to exploit the customer or buyer since they have nowhere else to go. The only caveat here is that once a buyer feels that their backs are against the wall, they will look for ways to get out. So, the trick here is to use your preferential status just enough not to frustrate the buyer.

The one thing to watch for is that buyers will never ever tell you that you’re a bottleneck supplier to them since this weakens their negotiation position. So, don’t listen to what a buyer tells you, instead look for your own facts by making a list of who your real competitors are. If you can’t think of any, there’s a good chance you’re a “bottleneck” supplier.

Happy negotiations everyone!