"Kraljic’s matrix identifies four types of items and services across four quadrants:Top right quadrant:? o Strategic items where supply risk and impact on profit are higho Highest impact on customer experienceo Price is a large portion of costo Typically have a single suppliero Focus on long-term partnerships with suppliersBottom right quadrant:? o Items with high impact on profito Low supply risk (leverage items)o Many supplierso Small percentage of cost savings will have a large impact on bottom lineo Focus on cost reduction by competition between suppliersTop left quadrant:? o High supply risk but low profit impact items.o Bottleneck componentso Do not contribute a large portion of the product cost o Suppliers have power positiono Ensure continuous supply, even possibly at a premium costo Focus on long-term contracts or by carrying stock (or both)Bottom left quadrant:? o Non-critical itemso Simplify and automate the procurement process as much as possibleo Use a decentralised procurement policy with no formal requisition andapproval processIt is also important to note that there are generally three types of purchasing situations thatmay occur for an organisation: The first type is that of capital goods that may represent alonger-term investment for an organisation that may require significant financial planning.The second is that of rebuys, which are repeat purchases that may either be identical tohistorical purchases (standard) or some variation thereof (modified). The third type is thatof MRO (Maintenance, Repair and Operations) items that are needed for the continuingoperation of the company and its supply chain activities.4 Strategic Sourcing Methodology[This page should take about 20 minutes to complete] Brick Manufacture flickr photo by Rubber Dragon shared under a Creative Commons (BY- SA) licenseThe process of strategic sourcing commences with the formation of a steering committee anda sourcing team, includes the development and execution of an appropriate sourcing strategy,and provides a direction for ongoing efforts in the contexts of transition, integration, andmeasurement and improvement of performance. Five core principlesTo help guide the strategic sourcing process, five core principles are recognised as keydrivers to achieve the desired levels of value. These principles are:1. Assess the total value: Emphasis must go beyond acquisition cost and evaluate totalcost of ownership and the value of the supplier relationship.2. Develop individual sourcing strategies: Individual spend categories need customisedsourcing strategies. "