Kraljic's Grid and Supplier Evaluation for Business Development

This assignment analyzes Kraljic's Grid, a strategic tool for supplier evaluation and procurement. The report begins by examining the fundamentals of supplier evaluation, including vendor rating and the factors influencing supplier selection, such as economic stability and capabilities. It then delves into the Kraljic's Supply Matrix, which categorizes items based on their impact on profit and supply risk. The assignment discusses each quadrant of the matrix – strategic items, bottleneck items, leverage items, and non-critical items – detailing the appropriate procurement strategies for each. The report emphasizes the importance of long-term partnerships, cost reduction through competition, and streamlined procurement processes. The analysis underscores how the Kraljic's Grid helps businesses optimize their supply chain management, improve strategic sourcing, and enhance overall business development.

Purchasing strategy

Kraljic’s grid

The supplier preferring model

Evaluation of Suppliers
In the past the suppliers were recognized by business before
transactions were appraised based on the track record
foundation. This assessment is regarded as “vendor rating”
In case the supplier is not known to the already existing
premises there is requirement to reviewing their abilities in
changed manner and based on diverse statistics for instance:
• Economic stability
• Industrial capabilities
• expertise of management
• Records
• Who they dealt with

Kraljic’s Supply Matrix
• Organization supply approach usually is pegged on
two perspectives
– Impact of the profit
• Volume purchased/ percentage of total
purchased cost/ impact on product quality or
business growth
– risk supply
• presence/number of the supplier/ demand of
competition/ make-or-buy opportunities/ risks
associated to storage/ substitution opportunities.

Kraljic’s Supply Matrix

Kraljic’s Supply Matrix
• Top right quadrant:
• Strategic items to which the risk of the supply and the effect of profit are huge
• Highest effect on the client experience
• Price is large portion to the cost of the system
• There is a single supplier
– Focus on long-term partnerships with suppliers
• Bottom right quadrant
• The items they have high effect on the profit
• There is low supply of the risk- on the leverage items
• There are many suppliers
• There is small % of cost savings and this has large effect on the bottom line.
– Focus on cost reduction by competition between suppliers

Kraljic’s Supply Matrix
• Top left quadrant:
– There is high supply of low but there low profits which have an effect on the items.
Bottleneck components
• It does not contribute to large portion of cost of product
• The supplier does have a power position
• There is a continuous supply even at the premium cost
•
– Focus on long-term contracts or by carrying stock (or both)
• Bottom left quadrant:
• There are no critical items
• There is simplification and automation of the processes of procurements
• There is usage of decentralized procurement policy which has no formal requisition
or even process of approval.