How do you review and update your supplier segmentation over time?

Now, throw in a twist - cyber considerations. It's like realizing that your old map doesn't show the digital terrain, the cyber highways and byways that your suppliers travel on. So, you start looking at your suppliers not just in terms of cost and quality but also through the lens of cyber resilience. Are they prepared for a digital storm? Do they navigate the cyber seas with skill and caution?

To assess your supplier segmentation effectively, start by aligning it with your business goals and procurement strategy. Use SWOT analysis to identify strengths and weaknesses in your current model, focusing on criteria like strategic importance and risk. Conduct gap analysis to pinpoint areas for improvement and benchmark against industry standards for best practices. Engage stakeholders and update supplier performance assessments. Plan actionable steps for refinement, implement changes, and monitor impacts. Ensure a regular review cycle to adapt to new information and strategic shifts, keeping your segmentation dynamic and aligned with evolving business needs.

Importante estabelecer métricas de acompanhamento para monitorar o desempenho dos seus fornecedores ao longo do tempo. Isso pode incluir métricas como qualidade, custo, prazo de entrega, satisfa??o do cliente, entre outros. Utilize essas métricas para avaliar continuamente o desempenho dos seus fornecedores e fazer ajustes na sua segmenta??o, conforme necessário.

Start by evaluating your existing supplier segmentation framework. Understand the criteria used for segmentation, such as spend volume, strategic importance, risk, and performance. Determine if these criteria still align with your business objectives and supply chain strategy. Review the effectiveness of the current segmentation in managing supplier relationships and driving value.

Effective supplier segmentation enhances procurement strategy, optimizes resource allocation, and strengthens supplier relationship, but to make it once and not visiting it periodically may hurt, organizations need to assess its segmentation and reallocate suppliers or may be to change the way of segmentation itself, due to: - Changes in the market (e.g., new technologies, economic shifts) - Needs to align with evolving business goals (expansion, diversification) - Leveraging new data sources (e.g., social media insights) - Analyze competitors’ segmentation approaches - Leverage AI and tools for better segmentation - Ensure alignment across teams - Adjust based on shifts in customer behavior

Gather comprehensive data on your suppliers to gain a clear picture of their performance, risk profiles, and strategic importance. This data should include metrics such as delivery times, quality, cost, and innovation capability. Analyze trends and patterns in this data to identify changes in supplier behavior and market conditions. This analysis will help you understand if your current segmentation remains relevant or needs adjustment.

Moreover, it is imperative to actively involve both internal stakeholders with security expertise and the suppliers themselves in this process. This collaborative approach ensures the accuracy and relevance of the security data collected, fostering a culture of transparency and shared responsibility towards cybersecurity. By integrating a focused evaluation of security practices into the supplier segmentation strategy, organizations can achieve a nuanced understanding of each supplier's security posture, thereby facilitating informed decision-making that aligns with the organization's strategic objectives and overarching security requirements.

In light of the economic uncertainty prevalent over the past four years, it's imperative that we reevaluate our segmentation criteria to ensure the resilience and agility of our supply chain. Adjusting our segmentation criteria and categories based on thorough data analysis to accurately reflect the evolving risk posed by our suppliers in the current and future landscape. Incorporating new criteria such as sustainability, diversity, and digitalization, while creating categories like strategic partners, preferred suppliers, or niche suppliers, will enable us to adapt to changing market dynamics and effectively navigate challenges. This proactive approach strengthens our strategic positioning for sustained success in dynamic environments.

Based on your analysis, refine your segmentation criteria to better reflect your current business environment and strategic priorities. You might need to introduce new criteria or modify existing ones. Consider creating new categories or merging existing ones to better align with your supplier management goals. Ensure that the updated segmentation criteria are clear and measurable.

The comprehensive analysis of both traditional and security-specific data pertaining to suppliers may reveal the necessity to recalibrate your segmentation framework. This recalibration is essential to ensure that your segmentation criteria accurately mirror the evolving landscape of supplier value and associated risks, particularly in the realm of cybersecurity. Adjustments could involve the introduction of new criteria or the modification of existing ones to encapsulate emerging trends and priorities within your business domain and the broader supplier market. For instance, the integration of cybersecurity as a critical criterion becomes imperative in light of the increasing prevalence of cyber threats.

To maintain proper supplier categorization management, I find it crucial to be constantly reviewing and updating the criteria throughout the procurement and sourcing process. Suppliers and situations are constantly changing, and this ongoing evolution necessitates calculated and controlled review of the criteria by which a supplier is categorized.

Re-evaluate your suppliers using the updated segmentation criteria and assign them to the appropriate segments. This process may involve reclassifying some suppliers based on their performance, strategic importance, or risk. Ensure that the re-segmentation process is systematic and based on objective data to maintain fairness and consistency.

Develop tailored management strategies for each supplier segment. For strategic suppliers, focus on building long-term partnerships, fostering innovation, and mitigating risks. For routine suppliers, emphasize cost efficiency and reliability. For bottleneck suppliers, implement risk management and contingency plans. Clearly define the engagement approach, performance expectations, and communication protocols for each segment.

Put your defined strategies into action by engaging with suppliers according to their segment-specific plans. Regularly monitor the performance of suppliers in each segment to ensure they meet the defined expectations. Use performance metrics and KPIs to track progress and identify areas for improvement. Adjust your strategies as needed based on ongoing performance data and feedback.

An iterative approach to refining your supplier segmentation criteria and categories ensures that your supplier management strategy remains dynamic, responsive, and aligned with both current realities and future aspirations. It underscores the importance of a holistic view in supplier evaluation, where traditional performance metrics are balanced with forward-looking considerations such as digital resilience, sustainability, and ethical practices.

Keep in mind that supplier segmentation is not a one-time activity but an ongoing process. Regularly review and update your segmentation framework to adapt to changing business needs, market conditions, and supplier performance. Engage with cross-functional teams to gain diverse perspectives on supplier management. Leverage technology and data analytics tools to enhance your segmentation process and make data-driven decisions. Lastly, ensure clear communication and collaboration with suppliers to align their goals with your strategic objectives.

The Supplier segmentation should be reviewed and updated by following the below process - - Alignment with current Business Strategy and Goals – these may have changed over period of time - Update categorization of various materials/categories on Kraljic matrix (spend value vs industry complexity) - Industry Analysis to identify new trends – technological, innovations, consumer preferences and dynamics among various industry players - Risk assessment of various categories - Feedback & Inputs from other stakeholders across the organization - Analysis of management strength, priorities, innovation strength, adaptability of individual suppliers