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Can you explain the difference between Strategic and Non-Strategic suppliers in a distribution-type business? (Webinar Attendee Question)

vendor managementThis question was asked by an attendee during the Proformative webinar "Using Customer Stratification and Cost to Serve Information in Your Sales Efforts to Maximize Profits" held on October 9, 2012.  You can view a video of the webinar and access the presentation here: https://www.proformative.com/resources/webinar-video-using-customer-stratification-cost

Answers

Topic Expert
John Kogan
Title: CEO/CFO
Company: Proformative, Inc.
(CEO/CFO, Proformative, Inc.) |

Strategic suppliers are those that account for a considerable amount of business (60-80%), demonstrate loyalty to their partners (exclusivity, limited distribution), are easy to do business with, and provide both growth and profitability. They typically represent about 6-10 suppliers.

Answer provided by Dr. Barry Lawrence, Program Director, Industrial Distribution Program, Texas A&M, speaker on a recent Proformative webinar on the subject of customer stratification.

John Mansfield
Title: Vice President Business Development
Company: Graybar
(Vice President Business Development, Graybar) |

We designate a supplier as strategic if they are vital to our long-term growth and profitability. Business with strategic suppliers is considered more profitable than business with other suppliers.

There can be several criteria that you would use to designate a strategic supplier. This could include dedicated resources they have given you, their engagement with your locations, whether they do planning with you, the extent of the marketing programs they do with you, and your mutual long-term goals.

The number of strategic suppliers will always be small compared to your total number of suppliers. I agree that they would normally represent 75% or more of your business, but the number could be larger or smaller than 6-10 depending on your business and the number of suppliers you utilize.

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