Segmenting Supplier Information Needs

We keep hearing that we must be ready for AI (in all its guises) if we are going to succeed in the increasingly competitive world of buisness. To make AI work well in procurement, we are going to need really good, robust, up-to-date and accurate data and information about our suppliers. Numerous surveys have shown that most organisations do not have that at the moment, although an increasing number are at least understanding just how important it is. Knowing about and understanding our suppliers well (not just the largest ones) is becoming more and more important for a whole host of reasons, and not just from an AI perspective.

One of our briefing papers, written by Peter Smith and HICX Solutions, lays out what we really need to understand about our suppliers and why. Understand Your Suppliers – Or Else! is free and available to download here.

And here's an extract to give you a flavour of what's in the report:

Segmenting Supplier Information Needs

Going through regulatory and reputational areas, each one may require a somewhat different approach from organisations, but there is at least one important point that all have in common. That is the need to have robust, accurate and extensive supplier information. To know that the appropriate suppliers have been briefed on your GDPR expectations, or to be as certain as you can be that you don’t have sanctions-busting or bribery in your supply chain, it is essential to understand your supply base.

That leads to the issue of segmentation. In terms of supplier management linked to performance, the usual approach is some sort of segmentation along the lines of the pyramid shown below. The strategic suppliers are those with whom we pursue deep “partnership”, perhaps even joint ventures and similar activities.  For most organisations, no more than a handful of suppliers – literally – will fall into this layer.

Then there is a segment we might call “collaborative” layer – where we may well be looking to capture additional value, encourage innovation, and have strong and trusting relationships. Large organisations may have between 10 and 50 suppliers at this level. Then perhaps several hundred or even more suppliers sit at what we have called operational level – these are suppliers that are less critical but still need careful monitoring and risk management because they do important work – providing goods or services – for the organisation.

Finally, there are those “transactional” suppliers, which aren’t that important in performance terms other than in the short term. In these cases, managing the transaction properly and ensuring a fair price for a decent product is important, but there is little real chance of gaining competitive advantage from their actions.

However, the problem when we consider the regulatory issues around supplier information, is that they do not correlate to where the supplier sits in the “pyramid” (see above ). So generally, the further up the pyramid, the more generally critical we might consider the supplier, and the more performance information we will probably want about that supplier.

But just because a supplier is in the “partnership” bracket, it does not mean you necessarily have the most complex or detailed requirement in terms of regulatory-related information. So, it can be suppliers that appear to be relatively tactical in general terms who can nonetheless generate the greatest issues in terms of GDPR, sanctions, or modern slavery. (Please download the paper here to read more ).

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