Supplier Segmentation and Supplier Relationship Management Services

Supplier Segmentation

Supplier Segmentation and Relationship Management

Supplier Relationship Management Insights Report

By Strategically managing supplier relationships, companies stand to reduce costs while driving efficiency and revenue growth.  Most companies, however, do not implement the appropriate level of supplier performance measurement for realizing the value of their partnerships. Source One’s SRM Insights Report explores the business case for an intentional supplier relationship management program and ways in which Procurement Leaders can do just that. Learn how to extend the value of your suppliers.

Establishing an SRM Program Whitepaper Guide

Source One's Supplier Segmentation Services Lead the Way to Supplier Relationship Management

Supplier Segmentation Services from Source One

Supplier Segmentation from Source One provides the foundation for an effective approach to Supplier Relationship Management.

Are you generating the maximum value from your supply base? If you’re not actively engaged in Supplier Relationship Management – you probably aren’t. Supplier Relationship Management is an essential component of the Strategic Sourcing cycle. It’s how Procurement moves beyond simply purchasing on a reactive basis and moves toward a strategic, proactive approach to its supply chain. When supplier relationships evolve into strategic partnerships, Procurement and its vendors of choice both reap the benefits. Beyond cost savings, a dedicated approach to SRM empowers Procurement to realize additional value adds in the form of process efficiency, innovation, mitigated risk, and more. It all starts with Supplier Segmentation.

Supplier Segmentation provides the foundation for a fully-strategic approach to Supplier Relationship Management. While it looks different for every organization, a typical approach to Supplier Segmentation will see Procurement assess its supply base and break it into four primary groups.

Strategic Suppliers

    • Significant impact to Procurement and the business as a whole.
    • Crucial to achieving Procurement’s long-term goals.
    • Necessitates a large investment and resource commitment.
    • Transitioning would require a significant investment.

Essential Suppliers

    • Key to Procurement’s operations.
    • Investing in the relationship has the potential to increase incremental value.
    • Few suppliers can fit into this segment.
    • Replacing the supplier would likely result in disruptions.

Commodity Suppliers

    • Relationships with these suppliers are mostly cost and delivery driven.
    • The market for these suppliers is typically saturated and substitutions are available.
    • Commodity-based relationships that respond to price movements in the market.
    • Transitioning from the relationship would present a medium level of disruption.

Transactional Suppliers

    • Defined by short-term, one-off purchases.
    • Transitioning would require little effort or costs.
    • Market for suppliers is highly saturated with potential substitutions.
    • Low visibility into relationships.

Once Source One has assisted Procurement in carrying out a Supplier Segmentation exercise, they’ll arm you with Procurement and Supplier Relationship Management best practices for optimizing prices and service levels at each segment. For example, the Supplier Segmentation experts will assist you in establishing national or global contracts for strategic suppliers. Featuring quality assurance requirements and designating account managers, these should establish a cadence for regular, formal check-ins. Source One will also assist Procurement in designing supplier scorecards related to essential KPIs like  product quality and supplier-led innovation. In less-essential segments, Source One’s team will assist Procurement in developing contracts aimed to guarantee a competitive rate. With frequent benchmarking and sourcing exercises, they’ll ensure agreements with commodity suppliers remain optimal and your organization maintains a competitive edge.

Learn more about how supplier segmentation can help Procurement build an apparatus for Supplier Relationship Management.

Contact Source One’s Supplier Segmentation Team

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