Divide, Conquer, Save

Computerworld - So many suppliers . . . so little time, money, staff and patience to manage them effectively. Your baseline of IT suppliers identified thousands of vendors . But you can't treat them all equally. Don't even try - divide and conquer. The most critical step in segmenting your supplier portfolio is sorting suppliers into strategic, emerging, boutique and commodity categories. Use these distinctions to identify your key suppliers, and then tailor your supplier management activities accordingly.
Strategic suppliers are critical to the success of your business. You probably spend the most money with these suppliers. Others in this category are suppliers that provide a unique product critical to your infrastructure and suppliers that are also major customers. This last group is included here for purely political reasons. Imagine a major airline and a major hotel chain that use each other's products. Another supplier might be cheaper, but neither of the companies would likely pull out of the arrangement casually.
It's also possible but unlikely that a boutique supplier would be a strategic supplier. (One client's telecom supplier made the strategic list because the firms' CEOs played golf together.) The definition of a strategic supplier will depend on your business. Whatever the criteria, strategic suppliers merit extra attention, which you can give them by doing the following:
• Find ways to help strategic suppliers cut their own costs in return for lowering yours. Share buying forecasts and assign them a single point of contact.
• Make sure their senior management is engaged in the relationship. Get their commitment to be included in problem resolution, and get after-hours contact information in the event of problems.
• Find ways to use their products across the enterprise in exchange for price breaks.
• Ask strategic suppliers for advice. Since they work closely with many levels of your company, they should be aware of ways to reduce your costs and improve service to you and your customers.
• Keep the list small. Fortune 500 companies should target 30 to 40 suppliers.
• Negotiate win-win deals. Don't try to squeeze so much that suppliers can't profit.
• Expect higher levels of service from strategic suppliers. In return, give them preferential treatment, higher volumes and services like fast contract approval. Many suppliers will improve their service levels to get (or stay) on your strategic list. Review their performances quarterly, and remove suppliers if they don't perform.
Emerging suppliers often aren't critical today but may be positioned to fill gaps in your IT architecture. They may offer a