3
One of the biggest challenges we observe in a number in organisations is the difficulty in reaching a common view internally as to who the strategic suppliers are. Procurement can play a vital role in resolving any political debates that might emerge over supplier segmentation and facilitating the segmentation exercise based on fact-based criteria rather than simply perception. The traditional approach to segmenting suppliers used to be based on spend only, assuming that the greater the level of spend, the more likely it is that the supplier will be strategic. However, an effective segmentation approach should be based upon not only spend but also business criticality and other criteria. These might include the level of dependence, supplier capabilities, supplier risk, perceived value opportunities, technology / innovation and contribution to brand value / competitive advantage.
Figure 35: SUPPLIER SEGMENTATION MODEL
HIGH
STRATEGIC
PREFERRED
APPROVED
TACTICAL
LOW
LOW
HIGH
Business criticality
Supplier segmentation is not an one-off task. The segmentation exercise has to be revisited on a frequent basis as supplier positioning can change as a result of shifts in strategy (on either side), the marketplace, competitive pressures, and so on. Four out of 10 organisations in the Greek survey revisit their supplier segmentation once a year, and a quarter repeats the exercise every six months.
Figure 36: HOW OFTEN DO YOU REVIEW AND AMEND, IF NEEDED, THE SEGMENTATION OF YOUR SUPPLIERS?
40.4%
Annually
46.7%
40.5%
24.7%
Every six months
35%
15.1%
13.5%
Not revisited yet
1.7%
32.2%
11.2%
Every 1-2 years
3.3%
7.8%
5.6%
Every 2-3 years
11.7%
2%
3.4%
Other
1.7%
2%
1.1%
3 years +
0.5%
51
0
10%
20%
30%
40%
50%
Global 2010 SRM Followers
Greece 2011 Global 2010 SRM Leaders
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