A Kraljic for all seasons? Relationship management tools in a crisis

Is the Kraljic Matrix a panacea for all procurement ills?

Is it still relevant in a crisis – or should we use other tools?

You may be following PIU’s Procurement in a Financial Crisis Series, but in our latest paper, we wonder whether tools should be specifically attuned to the needs of a severe economic downturn.

Perhaps a matrix which considers the future viability of a relationship, the supplier’s ability to cut costs or accept longer payment terms, over older classifications of ‘bottleneck’ and ‘leverage’.

Arguably, one can always go one step towards the abstract, and the Kraljic’s division between profitability against risk covers an infinitely broad set of scenarios. But, by doing so, its practical power is diminished.

I have recently had a discussion on Twitter whether the Kraljic Matrix was still useful in a financial crisis. Fellow members of the procurement twitterati David Atkinson ‏ (@DAtkinson4PC) and Tony Colwell (@tonycolwell) pondered over the applicability of the famous grid during a period of economic uncertainty.

I asked:

Jonathan Webb ‏ @j_p_webb

Is the Kraljic Matrix still useful in a crisis?

Tony Colwell ‏noted that using the tool properly my aid the organisation in positioning:

Tony Colwell ‏ @tonycolwell

@j_p_webb Kraljic Matrix helps avoid a crisis (but is not infallible). Like shutting the stable door, might stop the 2nd horse bolting!

The key here is putting the right suppliers and categories in the right boxes. Part of the problems that some buyers experience in managing their category or organisation to recovery, is the miss-use or over-use of a single tool.

David had a number of interesting comments in response:

David Atkinson ‏ @DAtkinson4PC

@j_p_webb It depends on what you’re trying to achieve. What does the crisis mean for your supply continuity and biz goals?

@j_p_webb [The Kraljic Matrix is] valuable in any circumstance. Users just need to remember that it’s just a tool; brings insight. Doesn’t make decisions 4U.

@j_p_webb Ultimately it boils down to the crisis’ impact on your business (cost, risk & revenue) and experience of your downstream customers.

Internally, within the PIU, I have asked some of my colleagues, and there is a similar reluctance in departing from a classic part of the buyer’s toolbox.

Perhaps the sensible solution to take is not to rely on any single tool, but on a variety of any potential aid that will help a company place itself again on steady footing. In this sense, Kraljic may have a smaller role in a broader set of indicators.

Tony Colwell ‏ @tonycolwell

@j_p_webb Depending on nature of crisis could need various tools. If complex I first create a ’roadmap’ of goals & dependencies then choose

For more of this kind of conversation, following me on twitter: @j_p_webb.