Like many things in our profession of procurement/purchasing/supply management/sourcing/acquisition, there is no standard for supplier stratification. However, there are some approaches that make more sense than others.
I believe that the approach that I've outlined in the aforementioned article is one of those that make the most sense. Because the concept of supplier stratification encompasses concepts both from that article and the preceding PurchTips article, "Supplier Collaboration, Development, More," allow me to summarize a few of the salient points here and then I will introduce the Next Level Purchasing Association's latest model, the Dominick Matrix.
First, let's restate the definitions of four approaches you can take to work with a supplier:
Supplier collaboration means working with decision-makers at a supplier to determine improvements that can be made that will have a measurable, positive financial impact for both organizations.
Supplier development means devoting some of your organization's resources to a project that develops a supplier's capabilities or expertise beyond current levels.
Supplier management means collecting metrics about a supplier's performance for your organization, sharing those metrics with the supplier, and discussing and implementing ways that the supplier can improve its performance as measured by those metrics.
Supplier rationalization means reducing the number of suppliers by consolidating purchases with fewer suppliers.
Second, let's review when to use each one of these approaches:
- 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
Finally, let me introduce you to the Dominick Matrix, which gives a quick, at-a-glance visual representation of which approach to use when:
Sometimes, the most successful way of getting started - and eventually succeeding - with something complex, is by simplifying things. I think that the Dominick Matrix, just like the Procurement Funnel, helps you in exactly this manner. Good luck using it!
To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer - Next Level Purchasing Association
Author - The Procurement Game Plan
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