What makes a supplier strategic

Though the phrase partnership is often used, what really constitutes a strategic supplier partnership? In a previous article about supplier management , I suggested that the more a supplier tells you that they are strategic, the less they really are. Strategic is a term that is often overused.

Whether the phrase refers to sourcing, procurement, relationships, or other matters, its use is prevalent. The notion of partnerships is equally ubiquitous and similarly both mis- and over-used. This article will identify a taxonomy for a strategic partnership between two parties.

Based on my earlier post about supplier relationship management , I introduced a three-tiered model for segmenting and managing suppliers. Vendor is the most commonly used term to define the entire spectrum of suppliers.

A vendor is the most tactical of suppliers. A preferred supplier has a longer-term, more intimate relationship with the customer. The relationship between the preferred supplier and customer is deeper than that of the vendor level. Supplier performance measurements are tracked and are the cornerstone of the longer term relationship. The strategic partner is the most far-reaching relationship of all three levels. Of course, not all strategic suppliers become partners.

The strategic partner occupies the elite position at the top of the supply base hierarchy. Partnerships develop over time with conscientious effort on both sides of the relationship. There must be a multi-faceted commitment between the companies to establish the requisite foundation for the relationship to be mutually productive and valuable. Strategic partners may be the fewest in number but they are the most critical to the success of the buying organization.

Ideally, both parties have this perspective. Strategic supplier management is one of the most important means to drive competitive advantage for modern multi-national corporations. The ability to extract the best from key partners is best as important as getting the best from employees. This article overviews some of the ways in which buyers can increase their effectiveness in managing critical suppliers. In a previous post, I examined the SRM framework. That is, exploring the supply chain as a whole and segmenting strategies and supplier initiatives based on those segments.

Here, SRM should look at the whole supply base and strategic suppliers to be considered as a part of the whole. Here are five ways to improve strategic supplier relations. Often is the case that buyers unilaterally declare their largest suppliers by spend as strategic. Unfortunately, spend does not necessarily create a strategic supplier. IT could be a bottleneck supplier who may be a larger and more powerful entity if this is the case, these can be considered gorillas, and subject to an entirely different strategy.

Where there is an investment by the supplier organization into the buyer, then we must explore whether there is positive feeling. Academics often can this 'goodwill trust', which describes a relationship where the view of the supplier towards the buyer has emerged into a more symbiotic connection in which the supplier possess overlapping interests with the buying company.

If they can do this effectively, the big payoff is a lasting collaborative partnership with suppliers of critical products or services that removes significant stress from complex supply chains. Suppliers of strategic components or services are where organizations should spend the most resources in building collaborative partnerships and alliances. But what makes a supplier strategic? A supplier is strategic if its greatest risk to supply and profitability is a disruption with its ability to fulfill orders.

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