Name: Mohamed Medhat Abd El-Fattah

Id:211018024

Code: ELES215

Deadline: November 22, 2022

Supervisor: Dr/ Mona Hammouda

Application of Kraljic’s Supply Matrix on Apparel (Cloth) Industry

1) Introduction

Kraljic Matrix

A key part of supply chain management is segmenting the vendor

base. From there, organizations can match design supplier

relationship management strategies against this map of suppliers. The

Kraljic Matrix is one of the most effective ways to deliver accurate

supplier segmentation.

"No company can allow purchasing to lag behind other departments

in acknowledging and adjusting to worldwide environmental and

economic changes. Such an attitude is not only obsolete but also

costly (Kraljic 1983)."

Kraljic Matrix focuses on two major impacts which are:

1) Profit

2) Risk.

2) Profit Impact

This dimension of the model is defined from low to high. What is

the strategic importance of the purchase of certain materials

required for the organization? What is the added value and

advantage that they deliver in the production line and what effect

do the costs of these materials have on the company’s overall sales,

profitability, and market share?

3) Supply Risk

This dimension of the model is also defined from high to low. To

what extent is supplying complex; is there abundance or scarcity of

the material required for the production in the organization? To

what extent are the materials as per the latest trends and have the

latest technology and materials substitutions been used? What are

 the logistics costs involved in the purchase cycle and are there any

sorts of monopoly or oligopoly conditions?

4) Application in Apparel Industry

In apparel Industry every company requires to identify categories

and condition of goods and services they need to acquire with

‘’Kraljic Matrix’’. Basically, there are two categories, they are

intangible and tangible facts that needs to identify for procurement

purpose.

There are four categories in Kraljic Matrix which can explain the

affect in apparel industry, as following:

1) Strategic Product Items (high profit impact, high supply risk)

These items deserve the most attention from purchasing

managers. Options include developing long-term supply

relationships, analyzing and managing risks regularly, planning

for contingencies, and considering making the item in-house

rather than buying it, if appropriate. These types of products are

purchased from one supplier only and there may be a balance of

power between the company and the supplier of the products

required. But when this supplier fails to deliver, purchasing

stagnates. In general, raw materials belong to this category. Raw

materials determine the value of the cost price of the finished

product, for example:

1) Sewing machines

2) Cutting machines

3) Steamers

4) Power generators

5) Quality checking machines

6) Fabric (High quality)

 7) Scanning machines

2) Bottleneck Product Items (high profit impact, low supply risk)

These items do not represent a high value but they are

vulnerable in nature and in the entire process of the supply

chain. These are products that are essential for the production

process but they are difficult to obtain from the suppliers in the

market. There is an imbalance of power between the company

and the supplier as the supplier is the dominant authority. By

creating the buffer stock of these scarce items and by finding

alternative suppliers, a company can iron out the flaws of this

bottleneck situation. Useful approaches here include over

ordering when the item is available (lack of reliable availability

is one of the most common reasons that supply is unreliable),

and looking for ways to control vendors, such as:

1) Sewing thread

2) Fabric

3) Spare parts/repairs
4) Cotton

5) Marketing and advertising

6) Sewing thread

7) Certifications and standards

3) Leverage Product Items (high profit impact, low supply risk)

These types of products can be easily purchased from different

suppliers in the market and they determine the value of the cost

price of the finished product. A minor change in price or a

change in quality will strongly affect the cost price of the final

product that is to be sold in the target market. In the balance of

power between the company and the supplier, the company is

the dominant one. By concluding good framework agreements

and finalizing the lucrative targeted pricing, the relationship

between the company and the supplier continues to be quite

fruitful in nature. Purchasing approaches to consider here

include using your full purchasing power, substituting products

or suppliers, and placing high-volume orders, for instance:

 1) Furniture

2) Different kind of paints

3) Batik fabric

4) Pressing machines

5) Scissors and cutting equipment (special)

6) Supervisors

7) Workers

8) Managers

4) Routine Product Items (low profit impact, low supply risk)

These types of products cause the least problems in the

purchasing performance of the company as such types of

products to represent a low value and they can be purchased in

different varieties and from different suppliers in the market.

Most types of raw materials and substances fall into this

category. There is a balance of power between the company and

the supplier in this scenario and by increasing product

standardization, much time and money can be saved of the

 company. Purchasing approaches for these items include using

standardized products, monitoring and/or optimizing order

volume, and optimizing inventory levels, such as:

1) Papers

2) Markers

3) Fabric (Normal)

4) Marketing and advertising

5) Water and electricity services

6) Communication services

Table of Contents

1) Introduction

2) Profit in Kraljic Matrix

3) Risk in Kraljic Matrix

4) Application in Apparel Industry:

1) Strategic (Critical) Product Items

2) Bottleneck Product Items

3) Leverage Product Items

4) Routine (Non-Critical) Product Items