What is Supplier Segmentation? Definition

Segmenting your suppliers is a key part of effective supply chain management. By identifying and classifying different types of suppliers, you can develop appropriate strategies for each and optimize your overall supply chain. But what exactly is supplier segmentation? In this blog post, we will explore the definition of supplier segmentation and its importance in supply chain management. We will also discuss some methods for segmenting suppliers and offer some tips on how to get started.

What is supplier segmentation?

Supplier segmentation is the process of dividing suppliers into groups based on their characteristics. This allows businesses to target specific suppliers with specific offers and improve their overall supply chain management.

There are many different ways to segment suppliers, but some common methods include by supplier type, by geographical location, or by spend. Supplier segmentation can be a complex process, but it can have a major impact on a company’s bottom line.

The benefits of supplier segmentation

Organizations that segment their suppliers can realize a number of benefits, including:

– Improved negotiation leverage and contract terms
– Greater control over spend
– Increased visibility into supplier performance
– More effective management of risk
– Enhanced supplier relationships

How to segment suppliers

There are a few key steps to take when segmenting suppliers. The first is to understand what supplier segments exist. There are many ways to segment suppliers, but some common supplier segments include by spend, by geography, by product or service, and by customer.

Once you understand the different ways you can segment your suppliers, you need to decide which criteria are most important to your organization. For example, if you’re looking to reduce costs, then segmenting by spend may be most important. If you’re looking to improve supplier diversity, then segmenting by geography or supplier type may be most important.

After you’ve selected the criteria that are most important to your organization, you need to gather data on your suppliers. This data can come from a variety of sources, including financial reports, customer surveys, and supplier questionnaires. Once you have this data, you can begin to segment your suppliers into different groups.

Finally, once you’ve segmented your suppliers, you need to develop strategies for working with each group. This may involve creating different teams for each group, tailoring your communication approach for each group, and setting different performance goals for each group. By taking these steps, you can ensure that you’re getting the most out of your supplier relationships.

Supplier segmentation case studies

There are many ways to segment suppliers, but some common methods include using supplier spend, supplier performance, or supplier risk. Each of these supplier segmentation case studies below provides an in-depth look at how one company used a specific method to improve their procurement process.

1. Segmenting Suppliers by Spend: This case study looks at how a company was able to save millions of dollars by segmenting their suppliers by spend.

2. Segmenting Suppliers by Performance: This case study looks at how a company was able to improve supplier performance by segmenting their suppliers by performance.

3. Segmenting Suppliers by Risk: This case study looks at how a company was able to reduce supplier risk by segmenting their suppliers by risk.

Supplier segmentation software

Supplier segmentation software is a tool that enables businesses to categorize and group their suppliers according to various criteria. This type of software can be used to track and manage supplier performance, identify potential risk factors, and optimize procurement processes. By segmenting suppliers, businesses can improve communication and collaboration, reduce costs, and ultimately improve the quality of their products and services.

Conclusion

In business, supplier segmentation is the process of dividing suppliers into groups based on their performance or potential. By creating supplier segments, businesses can identify opportunities for cost savings and improved quality. Additionally, supplier segmentation can help businesses manage risk by allowing them to focus on developing relationships with high-performing suppliers.