Procurement Glossary
Material groups: Systematic classification for strategic Procurement
November 19, 2025
Material groups form the foundation of a structured procurement organization and enable the systematic classification of goods according to defined criteria. This categorization creates transparency across the procurement portfolio and supports strategic decisions in Procurement. Find out below what material groups are, which classification methods exist and how you can use them successfully in practice.
Key Facts
- Material groups structure the entire procurement portfolio according to standardized classification criteria
- Enable targeted purchasing strategies and optimized supplier relationships
- Create a basis for spend analyses and cost transparency
- Support the standardization of procurement processes
- Form the basis for risk assessment and compliance management
Contents
Definition: Material groups
Material groups are systematic classifications of goods and services according to defined criteria such as function, procurement market or strategic importance.
Basic classification criteria
Material groups are formed according to various dimensions, which are weighted depending on the corporate strategy. Key criteria include
- Functional properties and intended use
- Procurement market characteristics and supplier structure
- Strategic importance and supply risk
- Cost volume and relevance of expenditure
Material groups vs. Categories
While Categories are primarily trade-oriented and structured according to product categories, material classes focus on procurement-relevant aspects. Material groups also take into account strategic factors such as supplier concentration and market dynamics.
Importance of material groups in Procurement
Material groups create the basis for a professional procurement strategy and enable differentiated approaches depending on material characteristics. They support the purchasing organization in specialization and competence development.
Methods and procedures
The development of an effective material group structure requires systematic procedures and proven classification methods.
ABC-XYZ analysis for material groups
The combined ABC-XYZ analysis evaluates materials according to value contribution and demand stability. A-materials with a high value contribution require intensive supplier relationships, while C-materials enable standardized procurement processes.
- A-Materials: Strategic partnerships and dual sourcing
- B-Materials: Balanced supplier portfolios
- C-materials: Automated procurement and blanket orders
Kraljic portfolio matrix
The Kraljic matrix classifies material groups into four categories according to supply risk and profit impact. This method makes it possible to derive specific procurement strategies depending on positioning.
Spend Cube analysis
The three-dimensional market analysis looks at spend volume, number of suppliers and material diversity. This method identifies consolidation potential and optimizes the material group structure based on actual procurement data.
Tacto Intelligence
Combines deep procurement knowledge with the most powerful AI agents for strong Procurement.
Key figures for controlling material groups
Effective KPI systems measure the performance of material groups and support data-based optimization decisions.
Spend concentration and diversification
The Herfindahl-Hirschman Index measures the supplier concentration per material group and identifies dependency risks. Values above 2,500 points indicate a high concentration and a need for action.
- Number of suppliers per material group
- Share of the largest supplier in the Group volume
- Geographical distribution of the supplier base
Cost transparency and savings
Material group-specific savings and cost trends show the effectiveness of the procurement strategies. Cost avoidance supplements realized savings with avoided cost increases.
Process efficiency key figures
Throughput times, degrees of automation and error rates per material group measure operational excellence. These key figures support the continuous process optimization and standardization of procurement processes.
Risks, dependencies and countermeasures
Unsuitable material group structures can lead to suboptimal procurement decisions and increased costs.
Overclassification and complexity
Material group structures that are too granular make practical application more difficult and reduce economies of scale. A balanced granularity between detailing and manageability is crucial for success.
Static classifications
Outdated material group structures do not reflect current market conditions and lead to inefficient procurement strategies. Regular reviews and adjustments are necessary.
- Annual strategy reviews of the material groups
- Continuous market monitoring and trend analyses
- Flexible adjustment mechanisms in the event of market changes
Organizational silos
Unclear responsibilities between different material groups can lead to coordination problems. A clear competence matrix in Procurement defines responsibilities and decision-making powers.
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Practical example
An automotive supplier structures its 15,000 materials into 12 strategic material groups. The "electronic components" group includes sensors, control units and wiring harnesses with an annual spend of 45 million euros. By bundling, the company was able to reduce its supplier base from 180 to 35 specialized partners and achieve cost savings of 12%.
- Consolidation from 180 to 35 suppliers
- 12% cost savings through volume bundling
- Reduction of the procurement cycle time by 30%
Trends & developments around material groups
Digitalization and sustainability are shaping the further development of material group concepts and creating new classification approaches.
AI-supported material classification
Artificial intelligence automates the allocation of new materials to existing groups and identifies optimization potential. AI in Procurement enables dynamic adjustments to the grouping logic based on market changes and procurement patterns.
Sustainability criteria in the classification
Environmental and social standards are increasingly being integrated as classification criteria. The Supply Chain Act reinforces the need to assess material groups according to sustainability risks and to develop corresponding procurement strategies.
Digital supply chain integration
The digital supply chain enables real-time classifications and dynamic material group adjustments. Blockchain technology creates transparency about the origin of materials and supports risk-based groupings.
Conclusion
Material groups form the strategic foundation of a professional procurement organization and enable differentiated purchasing strategies. Systematic classification creates transparency, reduces complexity and supports data-based decisions. Successful companies use dynamic material group structures that continuously adapt to market changes and combine operational excellence with strategic flexibility.
FAQ
How many material groups should a company have?
The optimum number depends on the size and complexity of the company. Typically, medium-sized companies have between 8-15 material groups, while corporations can manage up to 50 groups. The balance between detail and practical manageability is crucial.
Which criteria are most important for material grouping?
Strategic importance, procurement market characteristics and cost volume are the most important dimensions. Technical similarities, supplier structures and risk profiles should also be taken into account. The weighting varies depending on the industry and corporate strategy.
How often should material groups be checked?
An annual strategy review is recommended, supplemented by continuous market observation. Ad hoc adjustments are necessary in the event of significant market changes or company developments. New materials should be classified promptly.
What role does digitization play for material groups?
Digital tools automate classification, enable real-time analyses and support data-based decisions. AI systems identify optimization potential and suggest regrouping. Cloud-based platforms create company-wide transparency across material group structures.
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