If you’re managing projects of any significant size, procurement probably accounts for a big chunk of your budget. Poor procurement decisions are a major risk to your project. That’s why the Kraljic Matrix is an essential tool in your project management arsenal. So, what is it and how can you apply it to project management?
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The Kraljic Matrix
Why do we Need a Strategic Procurement Tool?
If you’re managing projects of any significant size, procurement probably accounts for a big chunk of your budget. Yet many project managers treat procurement as an afterthought – something to delegate to the purchasing department whilst they focus on the ‘real’ project work.
But poor procurement decisions are a major risk to your project. That’s why the Kraljic Matrix is an essential tool in your project management arsenal. So, what is it and how can you apply it to project management?
Kraljic, Pron: Kralich
What Is The Kraljic Matrix?
The Kraljic Matrix was developed in 1983 by purchasing expert Peter Kraljic, who published his groundbreaking approach in Harvard Business Review. The matrix is used in procurement and supply chain management to categorize purchases and suppliers by their supply risk and profit impact.
HBR September 1983: Purchasing Must Become Supply Management by Peter Kraljic
The beauty of this framework lies in its elegant simplicity. The Kraljic Matrix provides a structured approach to segmenting the supply base and developing differentiated purchasing strategies based on two key dimensions: impact and supply risk.
Think of it as a 2×2 grid. On one axis, you plot the financial or strategic impact of what you’re buying – how much it affects your project’s success and profitability. On the other axis, you assess supply complexity and risk – how difficult it would be to source alternatives if your current supplier fails.
Why Supplier Strategy Matters for Project Managers
Most projects involve some procurement activity. Whether you’re procuring materials, services, equipment, or specialist expertise, these purchasing decisions directly impact your project’s cost, timeline, and quality outcomes.
I’ve seen too many projects derailed because a project manager treated all procurement decisions the same way. They spent weeks negotiating hard on low-value office supplies whilst failing to properly manage relationships with critical suppliers of specialized components.
The Kraljic Matrix prevents this by forcing you to allocate your attention and resources where they’ll have the most impact.
The Supplier Four Categories That Matter
This creates four distinct quadrants, each requiring a fundamentally different approach:
Non-Critical Items (Low Impact, Low Risk)
Components that have a low impact on the company and that are found in abundance and / or in low-risk markets. For project managers, this might include standard office supplies, basic consumables, or commodity items. For such items, the goal should be to maximize efficiency of the procurement process to reduce the administrative burden.
Streamline the process. Use catalogs, e-procurement, or e-tendering. In this quadrant, you may want to delegate purchasing decisions to local managers. Don’t waste senior project team time on these items.
Leverage Items (High Impact, Low Risk)
Typically high-volume, low-complexity items. Focus on cost savings and efficiency. Use competitive bidding and volume bundling. In project contexts, think standard materials available from multiple suppliers, or common services where competition is fierce.
Negotiate Hard. Exploit your purchasing power to drive down costs. Use competitive tendering and don’t over-engineer the supplier relationships. Standard contracting approaches will suffice.
Bottleneck Items (Low Impact, High Risk)
Items with unpredictable supply but not critical to your project’s core success. Suppliers often face challenges with raw materials or production. These require careful monitoring and contingency planning, even though they don’t represent major budget items.
Secure Supply. Focus on supply security rather than cost optimization. Identify alternative suppliers and product alternatives, even if they’re more expensive. Consider holding buffer stock if the items are critical to maintaining project momentum.
Strategic Items (High Impact, High Risk)
Critical for the business and difficult to source. For project managers, these are the items that can make or break your project – specialized equipment, critical expertise, or unique materials. Focus on collaboration, joint ventures, and risk management.
Strategic partnerships. Build long-term collaborative relationships with suppliers. These require your personal attention as project manager. You need to understand suppliers’ capabilities and limitations, and develop contingency plans. Consider these suppliers as critical project stakeholders – they deserve a place in your communications plan and risk register.
Practical Implementation Tips for Using the Kraljic Matrix in Project Management
Start your matrix analysis early in project planning, not when you’re ready to procure. Use it to inform your procurement strategy, timeline, and budget allocation.
Don’t treat the matrix as static. Items can move between quadrants as market conditions change or as your project evolves. A supplier might start as leverage but become strategic if alternatives disappear.
Consider the supplier’s perspective too. If you’re a small customer to a large supplier in the strategic quadrant, your supply risk is actually higher than the matrix suggests.
The key is recognizing that effective project management isn’t just about managing your internal team – it’s about managing your entire supply ecosystem. And that requires strategic thinking about procurement, not just operational efficiency.
The Strategic Dimension
Here’s where the matrix becomes particularly powerful for project managers: it helps you think strategically about procurement rather than just operationally.
One of the primary applications of the Kraljic matrix is to assess and segment the company’s supply base into the four categories. This segmentation exercise provides a clear and comprehensive overview of the company’s purchasing requirements and risks.
For each quadrant, you develop different supplier relationship strategies. Strategic suppliers become partners in project success. Leverage suppliers become sources of competitive advantage through cost optimization. Bottleneck suppliers require risk mitigation. Non-critical suppliers need efficient processing.
So, the next time you’re planning a project, don’t treat procurement as someone else’s problem. Map your requirements using the Kraljic Matrix, and you’ll find yourself making better decisions about where to focus your time, how to structure your supplier relationships, and how to manage the risks that could derail your project.
Because successful projects aren’t just about good planning and execution – they’re about smart procurement strategy too.
Recommended Videos to Help with Project Procurement Management
Carefully curated video recommendations for you:
- Project Procurement Management 101 – All the Basics You Need to Know
- Competitive Procurement: How to Run a Tender Process
- What goes into Tender Documents? (Getting a Competitive Tender Process Right)
- Should a Project Manager Get Involved in Contract Negotiations?
What Kit Does a Project Manager Need?
I asked Project Managers in a couple of forums what material things they need, to do their job as a Project Manager. They responded magnificently. I compiled their answers into a Kit list. I added my own.
Check out the Kit a Project Manager needs
Note that the links are affiliated.
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