The Kraljic approach is taking into account the external factors; cost & supply which help to identify the domain approach per segment. Most purchasing assignments are being provided as a solution rather than individual products or services. This is often the preferred approach to having an end-to-end solution integrator instead of multiple suppliers and projects to manage. Even if the category planning and strategy have been initially developed, the most important for the procurement organization is to standardize the way to categorize company projects to create defined guidelines for each segment. Today, the saturated, highly competitive, and dynamic market requires procurement to create sustainable value rather than cost savings and security of supply. Most procurement organizations have difficulties in answering to corporate objectives. THE PROCUREMENT VALUE MATRIX HAS BEEN DEVELOPED TO TAKE INTO ACCOUNT INTERNAL & EXTERNAL FACTORS TO CREATE PROCUREMENT VALUE & ACHIEVE THE HIGHEST CUSTOMER SATISFACTION.

1. PROCUREMENT PROJECT VALUE MATRIX
Business Impact Ratio = Revenue impact
TCO
Project Complexity Ratio = Project Complexity
Supply Complexity

2. Missing Bricks for Value Creation
KRALJIC MATRIX MOST IMPORTANT STRATEGIC TOOL USED IN THE TELECOM INDUSTRY FOR
STRATEGIC POSITIONING OF PURCHASING ITEMS
Price Competition between vendors,
where procurement can explore
opportunity to add value
Sales & buyer’s companies have equal market
power. Integrated & transparent operations
planning process
managing the value chain together to mutual
benefits
245 Suppliers
25 Vendors
5 Outsourcing
60% of spend
30% of spend
Centralization, Volume bundling
Identification of maverick cost on Indirect
purchase such as office supplies.
Demand planning, Consignment stockings
- IT systems, Automating e-catalogs and
e-sourcing.
About 15,000 Suppliers
Monopolistic/ quasi-monopolistic
position due to their domain expertise.
Difficult switching vendors.
15% of spend
The picture
represents an
illustration of an
Operator spend
&
Vendor
segmentation
portfolio analysis
<1% of spend
100 Suppliers
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3. Missing Bricks for Value Creation
The procurement organization has been an administrative function tills Mr. Peter Kraljic introduced the concept
of supply management, giving the procurement sector a standardized strategic approach to answer the
corporate buying request. The concept has been the identification of supply risk and spend for a given category
or sub-category to position the item in the Kraljic Matrix.
Centralization vs. Decentralization, Synergy identifications, driving efficiency and productivity initiatives,
Providing visibility and control of supply chain, Low cost Country sourcing, Outsourcing of manufacturing/ IT /
Business processes and Offshoring of Operations have lead procurement to drive value by strategic purchasing
solutions and partnerships. Major improvements have taken place in optimizing, standardizing, automating
processes, procedures, tools and systems and driving divers cost reduction initiatives and managing a best in
class supplier management function. Still, procurement seems to have reached a death end of finding new ways
to show its true value to the organization; when expectation and need of procurement value creation is greater
than never before.
The Kraljic approach is taking into account the external factors; cost & supply which helps to identify the domain
approach per segment. Most purchasing assignments are being provided as a solution rather than individual
products or services. This is often the preferred approach on having an end to end solution integrator instead of
a multiple suppliers and projects to manage. Even if the category planning and strategy have been initially
developed, the most important for the procurement organization is to standardize the way to categories
company projects to create defined guidelines for each segment. Today, the saturated, highly competitive and
dynamic market require from procurement to create sustainable value rather than cost savings and security of
supply. Most procurement organizations have difficulties in answering to the corporate objectives.
THE PROCUREMENT VALUE MATRIX HAS BEEN DEVELOPED TO TAKE INTO ACCOUNT INTERNAL & EXTERNAL
FACTORS TO CREATE PROCUREMENT VALUE & ACHIEVE HIGHEST CUSTOMER SATISFACTION.
I.
II.
III.
IV.
Core Business projects
Business Enabling projects
Business Development projects
Business Improvement
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