The Procurement Glossary » Supplier Segmentation

Supplier Segmentation

Suppliers & Vendors

Definition

Grouping suppliers by importance and risk so management effort is focused where it delivers most value.

Explanation

Segmentation (e.g. strategic, leverage, bottleneck, routine) shapes how each supplier is managed: strategic partners get deep engagement, routine vendors get efficient transactions. It prevents spreading scarce relationship effort too thin.

Example

Segmentation flags five strategic suppliers for SRM and consigns hundreds of routine ones to self-service.

Related terms

• Supplier Management — The discipline of selecting, onboarding, evaluating and developing suppliers to maximise value and minimise risk over time.
• Kraljic Matrix — A model that classifies purchases by supply risk and profit impact to guide category and supplier strategy.
• Strategic Supplier — A supplier critical to the business — by spend, risk or capability — that warrants a close, managed relationship.
• Supplier Relationship Management (SRM) — A strategic approach to managing key supplier relationships to unlock mutual value beyond price.

Related concepts

• Supplier Management — Onboarding, qualifying, evaluating and governing the suppliers a business relies on — turning a scattered vendor list into a managed supply base.

Frequently Asked Questions

What is Supplier Segmentation?

Grouping suppliers by importance and risk so management effort is focused where it delivers most value. Segmentation (e.g. strategic, leverage, bottleneck, routine) shapes how each supplier is managed: strategic partners get deep engagement, routine vendors get efficient transactions. It prevents spreading scarce relationship effort too thin.

Can you give an example of Supplier Segmentation?

Segmentation flags five strategic suppliers for SRM and consigns hundreds of routine ones to self-service.

Back to the procurement glossary | Procurement concepts | Contact us