Which of the following is considered a leverage item in the Kraljic matrix?

The Kraljic matrix is a strategic tool used in procurement to categorize a business’s purchases based on their risk and impact on the overall profitability of the organization. A leverage item refers to a category where the procurement team can use their negotiating power due to low supply risk but can significantly impact the bottom line due to high profit margins.

The choice indicating "low risk, high profit" correctly identifies a leverage item because it captures the essence of taking advantage of a situation where the buyer is not particularly vulnerable to supply chain disruptions (low risk), yet has the potential to secure substantial savings or value from these purchases (high profit). In such scenarios, organizations can leverage their buying power to negotiate better terms and prices, thus maximizing profits while minimizing risks.

The other options describe scenarios that do not fit the definition of a leverage item. For instance, categories with high risk and low profit do not offer enough incentive to leverage negotiations effectively, while those that involve high supply risk indicate a more critical prioritization in sourcing strategies due to the potential threat of supply instability. Low impact and low supply risk items, while manageable, won't typically result in significant gains and are often managed through routine purchasing processes.