Expert recommends secret supplier rankings

28 August 2013

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29 August 2013 | Will Green

Buyers dealing with high numbers of suppliers should rank them according to their strategic importance, according to an expert.

Lutz Peichert, speaking as part of a Supply Business webinar yesterday, said a survey of sourcing professionals showed 28 per cent dealt with more than 500 suppliers. “The sheer volume of suppliers that needs to be managed requires a set of focused activities,” he said.

Peichert, vice president and principal analyst at Forrester Research, recommended dividing suppliers into those that are “substitutable”, “required” and “strategic” - meaning those partners that help firms “move forward”.

During the Using spend analytics for supplier categorisation and management webinar – held in association with Zycus – Peichert said spend analysis provided the tools to sort vendors into those groups and then move on to demand consolidation and preferred supplier management.

He warned it was important the ranking of suppliers remained an internal affair. “No-one wants to be substitutable,” he said. “It’s the different level of engagement with your suppliers that’s driven by spend analytics categorisation.”

Fellow speaker Christopher Ayscough, regional purchasing director at SITA, said it was important to see beyond spend analytics technology as established rules – such as spending 80 per cent with 20 per cent of vendors – still applied.

“It surprises me that many organisations don’t know their top 10 suppliers,” he said. “Successful spend analytics is not just about technology, it’s about how people work together to use the asset to create value for the business.”

Referring to the tender process, he said: “Spend analytics allows you to drill down into the information that you can use directly in terms of volumes and business line assessments.”

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