Strategic Suppliers
The recommended approach for Strategic
suppliers is to actively manage the relationship
Leverage
High
High
Routine

Consider long-term contracts or service-life agreements

Work closely with suppliers in product innovation and
process
Manage
Supply

Joint product/process design and planning
Bottleneck

Integrated systems

Supplier manages product/service

Consider on-site representation

Contingency planning
Strategic
Business
Impact
Easy
Difficult
Low
Easy
Low
Action Plan
Supply Market Opportunity
Difficult
e.g. typically most direct commodities fall into
this category
Strategic relationships must be partnerships with mutual benefits
Bottleneck Suppliers
The recommended approach for Bottleneck
suppliers is to ensure supply of critical items
High
Leverage
Action Plan

Long-term contracts

Ensure supplier is motivated to provide quality service

Look at developing new suppliers

Consider buffer stocks for additional security

Measure supplier performance to identify potential
interruptions to supply

Move to generic specifications where appropriate

Manage the entire Supply Chain
Strategic
High
Routine
Business
Impact
Low
Bottleneck
Ensure
Supply
Difficult
Easy
Supply Market Opportunity
e.g. complex specification products
Bottleneck suppliers should ultimately be transitioned into another quadrant
Leverage Suppliers
The recommended approach for Leverage
suppliers is to cut cost using innovation and
competition
High
Leverage
Low
Routine

Short-term contracts

Focus on price

Pursue a very active sourcing policy

Look for continued cost-reduction

Reduce stockholding

Consider the use of eAuctions

Pursue value add services from supplier which reduce total
cost

Manage transportation costs separately
Strategic
Reduce
Total Cost
Business
Impact
Action Plan
Bottleneck
Easy
Difficult
Supply Market Opportunity
e.g. commodities…
Leverage relationships are built solely around price
Routine Suppliers
The recommended approach for Routine
suppliers is to minimise management attention
and investment
High
Leverage
Routine
Business
Impact
Strategic
Bottleneck
Minimise
Effort
Low
Difficult
Easy
Action Plan

Mid-term contracts

Utilise supplier own specifications

Offer supplier incentives to substitute

Reduce inventory – supplier managed

Relationship owned by budget holder/end-user

Simple performance measurement process with focus on
reliability

Monitor internal time spent resolving problems
Supply Market Opportunity
e.g. Office Supplies, Desktops, Laptops etc.
Routine relationships should take up minimal time and effort