Combining segmentation and relationship continuum approaches to vendor management can help identify your best transactional, collaborative and strategic suppliers.
Today’s supplier managers are struggling with expanding portfolios that often contain three to five suppliers for every million dollars in purchases and include everything from commodity and niche product life cycle suppliers, to large consulting and IT service management contracts—even advanced robotic process automation software providers.
While these portfolios have grown in size and complexity, the approach to handling supplier services hasn’t changed much. Cost-minded executives may prioritize the top 10 suppliers in terms of spend, but that approach may be at odds with the true business value of each supplier, or not fully reflect the depth of the relationship. Further, this approach may not align with the aspirations and capabilities of suppliers to achieve business objectives.
Traditional supplier management has included segmentation methods, which generate a typical 2x2 model focused on spend. Firms with extensive large services contracts have worked with relationship continuum theory, which describes how to interact with predominately strategic suppliers. These two approaches typically used in isolation tend to focus on select suppliers, with mixed results. Combining these methods creates a robust, fact-based supplier strategy that both leverages the most valuable partners while at the same time simplifying interactions with commodity suppliers.
Read this paper to explore a data-driven strategy that combines the two segmentation methods as a solution for organizations with suppliers that run the gamut from transactional to collaborative to strategic partners. By managing each type differently, supplier managers can not only draw exactly what they need out of them with maximum efficiency, but also build relationships with suppliers for making positive, long-term impact on the business.