Supplier Plotting — How to Plot Your Suppliers Effectively

What is Supplier Plotting?

Purchasing has long been viewed as a mainly practical, experience-based profession, which helps explain why there is relatively little academic literature compared to fields like marketing or sales. Traditionally, purchasing was seen as a backroom function focused on placing orders, rather than a strategic activity.

Today, purchasing has moved into the boardroom and is increasingly recognized as a key strategic tool. Order placement is merely the final step, while real value lies in understanding markets, suppliers, and outsourcing decisions. As companies outsource more activities and rely heavily on suppliers for value creation, purchasing decisions have become critical to organizational survival. This makes both experience and a solid theoretical foundation essential.

A cornerstone of modern purchasing theory is Kraljic’s 1983 Harvard Business Review article “Purchasing Must Become Supply Management.” Its strength lies in its simplicity. The original four phases, reflection, analysis of bargaining power, plotting opportunities, and defining actions, are still highly relevant and form the basis of many procurement and negotiation frameworks today.

Kraljic’s 4 Quadrants

Kraljic’s matrix is used for Supplier Plotting by positioning products, services, or suppliers according to profit impact and supply risk. This helps clarify the balance of power between buyer and supplier and identifies the most suitable procurement strategy. Based on the quadrant, a company can decide whether to negotiate aggressively, standardize purchases, ensure supply continuity, or develop strategic partnerships.

We will explain the four quadrants of how to plot your own products, services, or suppliers in the model.

1: Minimize risk / Bottleneck quadrant
These are products with a limited source of supply. Their supply risk is high, but they do not have a major profit impact. This quadrant belongs in a “Supplier’s Market.” Here, the strength is in the hands of the supplier. The market consists of few suppliers that can behave freely and force prices upward. The purchasing strategy we would typically use for these types of items is twofold. Firstly, we need to ensure continuity of supply. Secondly, we need to develop plans to reduce our dependence on this supplier, by adapting our products and investigating alternative products and suppliers.

2: Leverage quadrant
Leverage items have a large financial impact on the organization; however, these items are in abundant supply. They are usually highly standardized and easily available. This quadrant belongs in a so-called “buyer’s market”. This means that buyers possess the balance of power in the relationship and leverage this strength to obtain greater returns. The purchasing strategies we would typically use for these types of items include tendering and competitive bidding.

3: Non-Critical quadrant
Non-Critical items are low risk and have a low-profit impact. They are usually the lowest on the priority list in a procurement strategy. There is a balance of power between buyer and supplier. These items cause the least problems for procurement managers because they can be purchased in different varieties and from different suppliers. By increasing product standardization, much time and money can be saved. Thus, the purchasing strategies we recommend for these types of items focus on reducing administrative costs and logistical complexity.

4: Strategic quadrant
Strategic items have high supply risk and high-profit impact and are bought mainly from strategic suppliers. These items are critical to the business. This power between buyer and supplier is balanced, and the goal here is to ensure long-term availability. The company needs to look for a “win-win” negotiation that benefits both parties. The purchasing strategies we would typically use for these items include collaboration and strategic partnerships.

Example of How to Plot Your Suppliers Using the Kraljic Model

In procurement, understanding the strategic importance of your suppliers is crucial for managing risk, optimizing costs, and ensuring smooth operations. The Kraljic Model provides a framework to classify suppliers based on two key dimensions: supply risk and impact on profit. By plotting suppliers into one of four quadrants: Bottleneck, Leverage, Non-Critical, or Strategic. 

Companies can tailor their purchasing strategies to each category, ensuring better negotiation outcomes and long-term supply stability.

1: Minimize Risk / Bottleneck Quadrant

For example, a company producing electronics may rely on specialized semiconductors that are available from only a few suppliers. These suppliers hold significant power due to limited availability. Companies should classify them as “bottleneck” suppliers, ensure supply continuity through contracts, and explore alternative sources or substitute components to reduce dependency.

2: Leverage Quadrant

A company buying standard metal screws in large quantities is an example of this quadrant. These items are widely available from many suppliers, giving the buyer the advantage. Suppliers in this category are best managed through competitive bidding and tendering to secure the best price and quality.

3: Non-Critical Quadrant

Office supplies, such as pens and paper, illustrate non-critical items. They are inexpensive, low-risk, and available from numerous suppliers. The recommended strategy focuses on product standardization, bulk purchasing, and minimizing administrative costs.

4: Strategic Quadrant

Specialized engines or core production equipment fall into the strategic category. Procurement relies on key suppliers, and these items have a significant impact on profitability. Companies should pursue long-term contracts, collaboration, and strategic partnerships to ensure stable supply and mutual benefits.

The Point of Supplier Plotting

Supplier plotting helps procurement managers prepare for market fluctuations. When a material is scarce, prices are high, but if supply later exceeds demand, prices drop, creating an opportunity to buy in bulk for future use. This approach relies on understanding supply and demand to optimize purchases and control costs during price surges. By monitoring market trends closely, companies can make strategic procurement decisions and improve their overall efficiency.

Conclusion

Emphasizing the evolving nature of purchasing from a practical task to a strategic tool, a balance between experience and theoretical understanding in the procurement profession is needed.

The Kraljic Model, a foundational framework in modern purchasing theory, introduces a systematic approach to supplier plotting. Divided into reflection, analysis, plotting, and action plan phases, the model offers a simplified yet powerful strategy for procurement professionals, as outlined in the Negotiation Course for Procurement Professionals.

Each of Kraljic’s four quadrants are tailored procurement strategies, aligning with market dynamics and power balances. Supplier plotting’s pivotal role in anticipating market changes, optimizing costs, and strategically procuring supplies is emphasized.

Furthermore, the integration of e-procurement tools adds a contemporary dimension to supply planning, automating data analysis and offering valuable insights.

I have created a free-to-download Kraljic Matrix template. It’s a PowerPoint file that can help you with your supplier plotting. I even made a video where I’ll explain how you can use this template.