Supply Excellence — Profiling Without the Controversy

Profiling Without the Controversy

December 28th, 2006 · by Tim Minahan · No Comments · supply management

While the Bush Administration and civil rights groups debate the balance between national security and racial screening, one type of profiling that is without controversy is category segmentation. In fact, it’s encouraged by everyone — except maybe commodity suppliers in a highly competitive marketplace.

I came across a compelling framework on the Strategic Sourcing Europe blog for profiling your spending into four distinct categories: standard, commodity, strategic, and bottleneck. Based on Michael Porter’s five forces model, the framework segments spend categories based on their business impact and their supply market complexity. The graphical framework also provides recommended supplier engagement and relationship management approaches for each segment.

For example, for commodity suppliers with low supply market complexity, the framework recommends “exploiting your buying power” by expanding your supplier options, using volume leverage, and negotiating aggressively. For strategic suppliers in markets with high complexity, try “creating competitive advantage” by engaging in joint development and strategic alliances.

This segmentation approach is by no means rocket science. It isn’t even original. (In addition to borrowing from Porter, the approach bears a striking resemblence to what I have previously described as wise-sizing your supply base.) But Strategic Sourcing Europe does provide an easy-to-understand visual and actionable framework. And everyone loves a nice picture.

See for yourself, here.

Email Forward & Bookmarks