Supplier segmentation is the grouping of suppliers using defined characteristics so governance and relationship effort can be proportionate. Dimensions may include business criticality, spend, substitutability, risk, innovation, performance, or category role. Segments should have clear criteria and resulting actions, such as review frequency, scorecards, executive engagement, contingency planning, or streamlined treatment.
In plain English
It groups suppliers so the organization can manage each relationship at the right level.
Illustrative example
At Northstar Industrial Systems, critical sole-source component suppliers receive deeper risk reviews and continuity planning than low-value, readily replaceable suppliers.
- Related terms
- Supplier risk assessment; Supplier scorecard; Preferred supplier; Category strategy
- Lifecycle stages
- Strategy; Govern; Optimize
- Stakeholders
- Procurement; Operations; Executive leadership; Supplier