The Kraljic matrix is one of the most widely used tools in procurement management. Its idea is to classify purchases on two dimensions: the importance and financial or operational impact of the item to the organization, and the complexity or risk of its supply market. The result is four segments, each requiring a different strategy — and that distinction is what moves procurement away from 'buying everything the same way'.
'Leverage' items are important and have many suppliers. Bargaining power sits with the buyer, so the right strategy is volume consolidation, competitive tendering and tough negotiation. 'Strategic' items are important and have a narrow supply market; dependence runs both ways, so the right strategy is long-term partnership, joint planning and investing in the relationship, not price pressure.
'Bottleneck' items are small in financial value but supply is limited or risky, and a shortage can stop production. The strategy here is not lower price but assured supply: more safety stock, an alternative supplier, a long-term contract, or even redesigning the product to remove the dependency. 'Non-critical' items have both low value and low risk; the right strategy is simplification: standardization, catalogs, automated buying and minimum specialist time.
A common mistake is that the procurement team spends most of its time on non-critical items and their purchasing process, because there are so many of them, while the real value is in strategic and bottleneck items. Kraljic segmentation shows directly where specialist effort should go. A simple test: write down the share of senior buyers' time in each of the four segments and compare it with each segment's actual importance; the imbalance is often striking.
To apply it, first list purchase categories (not individual items). For the first axis, assess share of total spend and impact on the final product or revenue. For the second, consider the number of qualified suppliers, switching cost, technical complexity and market risks (sanctions, currency volatility, single-country dependence). A simple three-level scoring (low, medium, high) is enough to begin; no complex model is needed.
An important point is that category positions are not fixed. A leverage item can become a bottleneck when new conditions arrive, such as an import restriction. So the matrix should be reviewed at least annually, and a change in a category's position should change its sourcing strategy. In the Iranian market, where currency and import risk shift quickly, regular review matters even more.
Another mistake is turning the matrix into a nice chart without decisions. Each segment needs a concrete output: for leverage, a list of planned tenders; for strategic, a list of partner suppliers and a joint plan; for bottleneck, a supply-assurance plan; and for non-critical, a simplification project. With those four outputs, the matrix becomes a work plan rather than an analysis.
In one sentence: Kraljic tells you where to be tough, where to partner, where to protect and where to simplify. Organizations that take this separation seriously usually improve in both cost and supply resilience, because they point limited procurement resources where they have the most effect.