Supplier Stratification & The Dominick Matrix

PurchTips edition #292

 

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Does Supplier Stratification Have To Be Difficult?

Supplier management. Supplier collaboration. Supplier development. The way that these terms are used to describe procurement best practices, you might assume that you should be using all of these techniques with each of your suppliers. That is not the case!

There are two variables that should influence which relationship management approach you should take with a supplier: (1) level of sophistication of that supplier, and (2) the supplier's materiality to your business. A supplier's level of sophistication can be either sophisticated or unsophisticated and its materiality to your business can be either tactical or strategic.

Sophisticated suppliers are those that possess the human talent, technology, resources, effective management, and desire to improve that manifest themselves in continual enhancements in business results for themselves and their customers. Unsophisticated suppliers are those that do not possess those characteristics.

Tactical suppliers are those that provide a product or service that does not directly affect your organization's customers' experience with your organization. Strategic suppliers are those that provide a product or service that does directly affect your organization's customers' experience with your organization.

That leaves four possible combinations to form a supplier stratification model. And, for each combination, there is a different relationship management approach you should take:

  • For sophisticated strategic suppliers, use supplier collaboration
  • For unsophisticated strategic suppliers, use supplier development
  • For sophisticated tactical suppliers, use supplier management
  • For unsophisticated tactical suppliers, use supplier rationalization

To view the "Dominick Matrix" - a tool that will help you visualize the appropriate application of these relationship management approaches - please visit my blog at http://tinyurl.com/l6rat5z.

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