The 2 fundamental axes of the Kraljic matrix
Objective: Understand the 2 axes of the Kraljic matrix (1983), know how to measure and score them to position each procurement category correctly.
Peter Kraljic published his model in 1983 in the Harvard Business Review. It has become the world's most widely used procurement segmentation tool. The matrix rests on 2 axes crossing the financial dimension and the risk dimension.
Vertical axis - Profit Impact
This axis measures the category's financial importance for the company.
| Criterion | How to measure it | Example |
|---|---|---|
| % of COGS or total spend | Category amount / total spend | Raw materials = 35% of COGS |
| Impact on product quality | Direct link to finished-product quality | Electronic components critical to reliability |
| Impact on growth | Contribution to innovation and development | Outsourced R&D = innovation lever |
| Value-added lever | Competitive differentiation delivered | Premium packaging design = brand positioning |
Scoring the impact
- 5 - Very high: > 15% of total spend, direct impact on quality and competitiveness
- 4 - High: 8-15% of spend, significant impact on operations
- 3 - Medium: 3-8% of spend, moderate impact
- 2 - Low: 1-3% of spend, limited impact
- 1 - Very low: < 1% of spend, negligible impact
Horizontal axis - Supply Risk
This axis measures the difficulty and risk of supplying the category.
| Criterion | How to measure it | Example |
|---|---|---|
| Number of alternatives | Qualified suppliers available | 3 global suppliers of specialised chips |
| Technical complexity | Specificity, customisation, qualification | Custom part with 6 months of qualification |
| Switching costs | Cost and time to change supplier | ERP migration = 18 months and EUR 2M |
| Replacement lead time | Time needed to qualify an alternative | Pharmaceutical qualification = 24 months |
| Geopolitical risks | Stability of the source country/region | Rare earths: ~70% of extraction and ~90% of refining in China (IEA, 2025) |
Scoring the risk
- 5 - Very high: Single source, proprietary technology, replacement lead time > 12 months
- 4 - High: 2-3 sources, high complexity, 6-12 month lead time
- 3 - Medium: 4-6 sources, moderate complexity, 3-6 month lead time
- 2 - Low: 7-15 sources, standard product, 1-3 month lead time
- 1 - Very low: > 15 sources, commoditised product, immediate switch possible
💡 Key takeaway: Kraljic's 2 axes (financial impact and supply risk) must be scored objectively with factual data. The most frequent mistake is scoring intuitively without data. Use the criteria tables and involve technical stakeholders for the risk scoring.