Supplier Segmentation: Prioritize Relationships for Maximum Value

Let me start with a simple question, are you treating all your suppliers the same way?

If the answer is yes, you might be spreading your time and effort too thin.

Not every supplier needs the same level of attention, and trying to manage them all equally can actually reduce your impact.

I’ve learned that the real value in procurement comes from knowing where to focus.

That’s where supplier segmentation makes all the difference.

Understanding the Concept

Supplier segmentation is about categorizing suppliers based on their importance to your business.

Instead of a one-size-fits-all approach, you tailor your strategy based on the value, risk and impact each supplier brings.

Think of it as working smarter, not harder.

♦ Identify Your Strategic Suppliers: Invest time in building strong, collaborative relationships with these suppliers. Regular reviews, joint planning and open communication are essential.

♦ Recognize High-Risk Suppliers: Develop risk mitigation plans for your high risk suppliers. This could include identifying backup suppliers or increasing inventory buffers.

♦ Manage Transactional Suppliers Efficiently: Streamline processes for these suppliers. Use automation, standardized contracts and minimal touchpoints to save time.

♦ Focus on Value, Not Volume: Look beyond spend. Consider factors like business impact, risk and potential for innovation when segmenting suppliers.

♦ Tailor Your Engagement Approach: Customize your engagement strategy. Strategic suppliers may need frequent meetings, while transactional ones may only require periodic check-ins.

♦ Review and Adjust Regularly: Revisit your segmentation periodically. Adjust your priorities as business needs evolve.

Remember that supplier segmentation isn’t about doing more work, it’s about doing the right work.

Need procurement specific training? Reach out to support@efemini.com and we'll get you sorted.