69
Segmentation Segmentation of the supplier base is now almost a given for any organisation looking to develop an effective SRM approach. Over 80% of our respondents say they formally segment their suppliers. The variation is now more around the criteria that are used and the number of segmentation tiers that are thought to be appropriate. This chart indi- cates the typical segmentation criteria being used. Clearly spend and product or service criticality remain the most important criteria for most businesses, but with an increased number expanding the criteria to address strategic alignment and value crea- tion opportunity, as well as risk.
Figure 3.3. Most commonly used segmentation criteria – buy side
92%
YOUR IMPORTANCE AS A CUSTOMER TO THE SUPPLIER POTENTIAL TO GIVE YOU COMPETITIVE ADVANTAGE RISK CONTAINMENT LEVEL OF DEPENDENCE CRITICALITY OF PRODUCTS / SERVICES SPEND
1
88%
66%
53%
35%
33%
31%
APPETITE FOR COLLABORATION VALUE IMPROVEMENT POTENTIAL TECHNOLOGY AND / OR INNOVATION
28%
26%
24%
OTHER MARKETING AND / OR CONTRIBUTION TO BRAND VALUE SUSTAINABILITY AND CSR RISK GENERAL CAPABILITIES HISTORICAL RELATIONSHIP
20% 20%
11%
4%
An industry sector perspective All sectors rank spend, product or service criticality and level of dependence on the suppliers, as the most important criteria to be applied to segmentation. Our analysis of survey responses reveals that FMCG have the broadest range of criteria in use, including technology and innovation, risk containment, and appetite for collaboration amongst others. IT / high tech companies are the next in line, with potential of the supplier to improve competitive edge and, as you would expect, technology and innovation widely used. Financial services and oil and gas also have a greater tendency to use risk contain- ment as a key criteria.
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