Just as the fictional school of Hogwarts sorts its aspiring wizards and witches into four houses in the Harry Potter fims, a supplier positioning matrix sorts suppliers into four categories and aids you and your company by minimising the cost of compliance.
Supplier positioning matrix
High risk / High value
Supppliers need to be trusted partners working closely to achieve shared objectives. A deep two-way understanding is needed, especially when dealing with assets that are direct components for your business.
High risk / Low value
Processes need to provide efficient mitigation against risks. Pertinent information needs to protect buyer is essential. This strategic security and investment in facility maintenance and tooling can negate risks associated.
Low risk / High value
Buying power can be used to achieve the best deal for customers. Buyers need enough information to get the best from the market. This tactical profit approach is synonymous with consumer purchases such as energy and cars.
Low risk / Low value
Using the simplest possible process to find and use suppliers, only basic information is needed for these tactical acquisitions. Furnitue and stationary are such examples of these kinds of purchases.
By differentiating suppliers on the basis of level of risk and value of business you can prioritise use of compliance resources and use strategies that reflect risk and spend to minimise the cost of supply chain management. For example, it's not necessary to audit all suppliers, which is an expensive way of achieving compliance. This method can be reserved for where the risk and contract value warrants it.
The most basis checks can be reserved for low risk/low value suppliers, such as stationery vendors, where financial health checks will probably suffice. It's important to ensure financial solvency of all suppliers and processes such as Company Watch, which is a standard element of the Altius compliance service, make this easy. .
Smart technology and outsourcing routine processes can help make assessment simpler and reduce cost. It's important to use your resources where they will bring benefit to you and your customers, i.e. the 'Strategic Critical' supplier category, where you've got the most to lose and the highest chance of losing it.
Free guide to managing contractors
To help businesses better manage contractors, Altius has created the free guide, Improving Contractor Performance with Compliance: A Guide for Facilities Managers. The guide can help you find a better approach to supplier management, give tips on objective decision making, and help you find the right tools for monitoring contractor compliance. Download your free guide by clicking here.
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