The risk factor entails the degree of exposure your business has to performance failures from suppliers-for example, late deliveries, service failures, warranty problems, quality defects, and more.

The spend factor entails more concentration on critical suppliers to your business process and on whom you are willing to spend time and resources.

A typical approach is examining the supply base by вЂњspendвЂќ and вЂњrisk.вЂќ

Getting familiar with these attributes or characteristics of critical suppliers can be attained while working with them. Nevertheless, there are several other considerations like competition, performance potential, market factors, and other considerations that can add to segmentation challenges. Typical segmentation exercises help define вЂњhow dependent your business operation is on a particular supplier(s)?вЂќ or вЂњhow costly or difficult it is to switching supplier?вЂќ. The supplier segmentation matrix is created majorly for activities like sourcing negotiations and supply base rationalization. So, What is the Supplier Segmentation Matrix? Today, segmentation complexities require multidimensional matrices to address all associated peculiarities and risk factors. Unfortunately, no one supplier segmentation applies to every business model. The use of Supplier Segmentation for supply base implies categorizing suppliers through analysis and prioritization process solely to allocate suitable resources, manage and monitor them.

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