Alticor
Supplier / Commodity Segmentation Model
The Supplier Segmentation Model has been developed to provide guidelines for Sourcing Strategy Teams (SST’s) and buyers to classify our supply base. It
provides structure to our business relationship with suppliers thereby enabling:
 Alignment within Alticor regarding the commodity strategy and classification of suppliers within the commodity
 Alignment with our suppliers regarding our requirements, direction, and expectations
 Sourcing activities that are focused on developing high-performing, well-aligned relationships that can drive innovation and product development.
The five supplier classifications Alliance Partner, Preferred,
Approved, Conditional and Eliminate
are summarized in the graphic to the
right, and are described in detail in
matrix on the following pages.
Alliance Partner
• Supplier relationship critical to Alticor's long-term success. Fully integrated activities.
• Target: <1% of supply base.
Preferred Supplier
• Supplier relationship important to Alticor's success and difficult to replace.
•Integrated involvement in each parties' activities.
The Model is comprised of two
categories – Business Relationship,
and Performance:
 The Business Relationship
Category describes guidelines on
how we intend to award business,
establish contracts, review and
communicate with our suppliers.
The corresponding supplier
responsibilities are also outlined.
 The Performance Category
defines the requirements that
suppliers should maintain to
achieve the classification.
Revision Date: July 22, 2005
Approved Supplier
• Supplier relationship considered “standard.”
• Activities coordinated on a limited basis.
Conditional Supplier
• Supplier relationship is ”arm’s length” and replaceable when/if necessary.
• Supplier can provide existing items, but no new items without SST approval.
Eliminate
• Actively seeking to eliminate supplier.
Page 1 of 4
Supplier
Supplier / Commodity Segmentation Model
ALTICOR
Supplier
Classifications
Preferred
 ALTICOR is recognized as a “Top”
customer and considered strategic or
important.
 New technology & items offered to
ALTICOR at same time as all other “top”
customers.
Approved
 Show new technology or items
soon after market introduction
during scheduled visits.
Conditional
 No responsibility to show new
technology or items.
The 1st choice for new business,
development projects, and long-term
relationship development.
 Alliance Partners are qualified, whenever
possible, to supply existing and new
items within a given commodity without
review by appropriate SST or Strategic
Procurement (if no SST exists). SST
should be notified of award of new items.
 Alliance Partners comprise a very small
percentage of Alticor’s total supply base.
The 2nd choice for new business,
development projects, and long-term
relationship development.
 Preferred suppliers should be utilized in a
given commodity when an Alliance Partner
is unable to supply the required item.
 Preferred suppliers are qualified, whenever
possible, to supply existing and new items
within a given commodity without review by
SST or Strategic Procurement (if no SST
exists). SST should be notified of award of
new items.
The 3rd choice for new business or
development projects.
 Approved suppliers should be
utilized in a given commodity
when an Alliance Partner or
Preferred supplier is unable to
supply the required item.
 Approved suppliers are qualified
to supply existing items within a
given commodity. For new items
SST should be engaged.
May supply existing items. No
new items may be sourced from a
Conditional supplier without
approval from a SST or
Procurement.
 Conditional suppliers are
qualified to supply only existing
items within a given commodity.
 All new suppliers in a given
commodity will be considered
"Conditional" until a review of
actual performance (minimum of
180 days history).
 Long Term with Statement of Work
(SOW) – Preferably 3 year minimum.
 Agreement in place to monitor tie
between costs drivers and prices.
 Process Improvement Team(s) in place
 Short term contract may be in place – 1
year minimum.
 Agreement in place to monitor tie between
costs drivers and prices.
 Process Improvement Team(s) in place
 Contract may be in place (PO).
 Lock in best pricing. If agreeable,
monitor tie between cost drivers
and prices.
 Contract may be in place (PO).
 No new contracts awarded until
supplier moves to “Approved”
status.
 Monitor contract for compliance annually.
 If applicable, monitor contract for
compliance semi-annually.
 If applicable, monitor contract
quarterly for compliance.
 If applicable, monitor contract
quarterly for compliance.
 Annual review – Supplier will initiate
information sharing (10(k), Annual
Report, etc.).
 Cost Drivers identified and shared.
 Agreement to Terms (2/10 net 30 for
example).
 Total Cost Reduction goals established
(quality, inventory, lead time, etc.).
 Annual review – Supplier will initiate
information sharing.
 Cost Drivers may be identified and shared.
 Agreement to Terms (2/10 net 30 for
example).
 Total Cost Reduction goals established
(quality, inventory, lead time, etc.).
 Annual review.
 Cost Drivers may be identified
and shared.
 Agreement to Terms (2/10 net 30
for example).
 Optional Review
 Cost Drivers may be identified
and shared
 Agreement to Terms (2/10 net
30 for example).
 Financial “health” reviewed annually.
 Tracking of Escalators & Cost Drivers.
 Tracking of discounts.
 Financial “health” reviewed annually.
 Tracking of Escalators & Cost Drivers.
 Tracking of discounts.
 Financial “health” reviewed
annually.
 Tracking of Escalators & Cost
Drivers.
 Tracking of discounts.
 In depth for new suppliers.
 Financial “health” reviewed
annually.
 Tracking of Escalators & Cost
Drivers.
 Tracking of discounts.
ALTICOR
Contracts
Supplier
Business Relationship
Awarding
New Business
Alliance Partner
 ALTICOR is recognized as a “Top 5
Strategic” customer.
 New technology & items discussed in
technology development phase and
offered to ALTICOR first with a useful
head start prior to official launch to other
customers.
ALTICOR
Financial
Review
Revision Date: June 23, 2005
Page 2 of 4
Supplier / Commodity Segmentation Model
Conditional
 Share new ideas, technology,
materials at scheduled visits via
appointments with product
development staff.
Presentations to technical staff
not appropriate unless on an
exception basis and approved
by SST.
 Share technology plans (general).
 Share new product plans (general).
 Limited technology plan sharing
as appropriate in support of
ALTICOR’s interests.
 N/A
 Quarterly / Semi-annual presentations on
performance, technology, market
conditions.
 Key personnel available when requested.
 Invitation to Supplier Conference
 Semi-Annual presentations on
performance, technology, market
conditions.
 Key personnel available when requested.
 Invitation to Supplier Conference
 Annual summary report on
performance, technology,
market conditions made
available upon request.
 Key personnel available when
requested.
 Plan, organize and communicate.
 Full SST participation along with
appropriate business area(s).
 Plan, organize and communicate.
 SST involvement along with appropriate
business area(s).
 Annual presentations on
performance, technology, market
conditions.
 Key personnel available when
requested.
 Possible invitation to Supplier
Conference
 Plan, organize and communicate.
 Appropriate business area(s)
participation with SST notification
 Communication with Ada Executive
Management with SST integration.
Executive Team helps to foster
relationship.
 Communication with Management in
Procurement, & other functional areas as
necessary, with SST integration.
 Sales Rep. to Team / Buyer
communication.
 Sales Rep. to Team / Buyer
communication.
 Communication with Supplier Executive
Management with SST integration.
 Executive Team helps to foster
relationship.
 Communication with Supplier Middle
Management with SST integration.
 Team / Buyer to Sales Rep
communication.
 Team / Buyer to Sales Rep
communication.
Supplier
ALTICOR
On-Site
Visits &
Presentations
Supplier
ALTICOR

Management
Interaction
Revision Date: June 23, 2005
ALTICOR
Supplier
Business Relationship
Product
Development /
Technology
Classifications
Preferred
 Proactively initiate technology updates and
new product ideas when they become
available. Presentations to technical staff
encouraged. Include PD SST member on
presentation invite.
 Willing to assist ALTICOR with product
testing and registration needs (i.e. EPA,
FTC, etc…) when justified. Share market
research.
Approved
 Share new ideas at scheduled
visits.
 Provide data necessary for
product registration.
 Presentations to technical staff
acceptable. Notify SST of
pending presentation.




Alliance Partner
Proactively initiate technology updates
and new product ideas – Inform
ALTICOR of developmental status and
ask for assistance where applicable.
Presentations to technical staff
encouraged. Include PD SST member on
presentation invite. Exclusivity is always
encouraged.
Always willing to assist ALTICOR with
product testing and registration (i.e. EPA,
FDA, etc…) needs. Share market
research.
Share technology plans (detail).
Share new product plans (detail).
Assist in new product/application
development and testing where
applicable.
 Plan, organize and
communicate.
Page 3 of 4
Supplier / Commodity Segmentation Model
Supplier

(Supply Based
Continuous
Improvement)
ALTICOR
Supplier
Quality
Development
Supplier
Recognition
Program
ALTICOR
Supplier
Performance
Supplier
ALTICOR
Performance
Evaluation
ALTICOR
Portal
Revision Date: June 23, 2005





Alliance Partner
Must maintain minimum requirements by
commodity to retain Alliance Partner
classification.
Formal response required if rating falls or
if requested.
Sets yearly targets and presents
progress at presentations.
Establishes performance targets.
Generate Performance Scorecard
SST Review of Performance against
objectives on a quarterly basis or more
frequently, as required.
Classifications
Preferred
 Must maintain minimum requirements by
commodity to satisfy classification.
 Formal response required if rating falls or if
requested.
 Sets yearly targets and monitors progress.
 Establishes performance targets.
 Generate Performance Scorecard
 SST Review of Performance against
objectives a quarterly basis or more
frequently, as required.
Approved
 Must maintain minimum
requirements by commodity to
satisfy classification.
 Formal response required if rating
falls or if requested.
 If requested, sets yearly targets
and monitors progress.
 Establishes performance targets.
 Generate Performance Scorecard
 Buyer Review of Performance
against objectives.
Conditional
 Formal response required if
rating falls or if requested.
 If requested, sets yearly targets
and monitors progress.
 Establishes performance
targets.
 Generate Supplier Performance
Scorecard
 Maintain quality rating of 98% or greater
based upon:
 Incoming quality
 Quality systems evaluation
 Customer service on issues
 CAPA Responsiveness
 Share best practices to help ABG
achieve goals.
 Monitor and improve quality performance
 Perform quarterly quality performance
evaluation.
 Jointly develop targets and action plans
for continued progress towards total
lowest cost.
 Apply shared best practices to drive
prevention.
 Audit supplier facilities and data.
 Eligible for recognition program.
 Recognized as Alliance Partner.
 Maintain quality rating of 95% or greater
based upon:
 Incoming quality
 Quality systems evaluation
 Customer service on issues
 CAPA Responsiveness
 Share best practices to help ABG achieve
goals.
 Monitor and improve quality performance
 Perform quarterly quality performance
evaluation.
 Jointly develop targets and action plans for
continued progress towards total lowest
cost.
 Apply shared best practices to drive
prevention.
 Audit supplier facilities and data.
 Eligible for recognition program.
 Recognized as Preferred Supplier.
 Maintain quality rating of 90% or
greater based upon:
 Incoming quality
 Quality systems evaluation
 Customer service on issues
 CAPA Responsiveness
 Maintain quality rating of 80% or
greater based upon:
 Incoming quality
 Quality systems evaluation
 Customer service on issues
 CAPA Responsiveness
 Focus on identified issues.
 Monitor and improve quality
performance levels.
 Perform quarterly quality
performance evaluation.
 Set targets and develop action
plans to drive towards total lowest
cost (reduced appraisal, TAT,
etc.).
 Audit supplier facilities and data.
 Eligible for recognition program
based on SST request.
 Monitor and improve quality
performance levels.
 Perform quarterly quality
performance evaluation.
 Set targets and develop action
plans to drive towards more
reliable supply.
 Audit supplier facilities and data.
 Manage recognition program.
 Manage recognition program.
 Manage recognition program.
 N/A
 100% use of Supplier Portal features –
Scorecard, Open Orders, Forecast,
Frictionless, VMI, DMDO’s.
 100% use of Supplier Portal features –
Scorecard, Open Orders, Forecast,
Frictionless, VMI, DMDO’s.
 100% use of Supplier Portal
features – Scorecard, Open
Orders, Forecast, Frictionless,
VMI, DMDO’s.
 100% use of Supplier Portal
features – Scorecard, Open
Orders, Forecast, Frictionless,
VMI, DMDO’s.
 100% support of Supplier Portal
requirements / Frictionless.
 100% support of Supplier Portal
requirements / Frictionless.
 100% support of Supplier Portal
requirements / Frictionless.
 100% support of Supplier Portal
requirements / Frictionless.
 Not Eligible
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