SUPPLY chain strategy based on supplier relationship could be crafted using the supplier referencing (preferencing) matrix that enables the supply chain function to manage relationships from both the procurement and marketing point of view.
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The matrix provides a correlation between the attractiveness of the buyer’s account and the revenues generated, which in turn will influence the nature of the relationship.
The model presents a rather two-way view or a total reverse view of portfolio matrix when it represents the suppliers perspective of business relationships.
The matrix makes it easier to separate wood from trees when it comes to identification of important relationships to achieve the organisation’s competitiveness.
The model looks at how different stakeholders can influence strategy development.
It classifies stakeholders in relation to the power they hold and the extent to which they are likely to show interest in supporting or opposing accordingly. The power of each stakeholder will vary between industries, markets and countries, but two factors always remain the same. The interest each stakeholder shows in communicating their expectations on the organisation’s strategy and the level of power and persuasion the stakeholder possesses to enable this to occur.
Low power — low interest stakeholders do not require much effort in consultation. The organisation can craft a successful strategy without the input of this group of suppliers. The quadrant is classified Nuisance and the suppliers in this matrix are given low attention. Losing such suppliers would not bother the buying organisation. This is the wood among trees.
The other group classified Development, the Low power — high interest stakeholders need to be kept informed as a matter of courtesy since they have little power. The interest therefore makes it desirable to show courtesy by just informing them about the developments. There is potential to nature such type of supplier and further expand their business.
Another critical group classified Exploitable is the Low interest — high power stakeholders need to be kept satisfied since they have capacity to resist if upset by your actions. Such group of suppliers can resist strategic direction that an organisation takes even if they have low interest due to the power they possess. The strategy would be to seek short-term advantage from such suppliers.
The most critical class of the Core, the High interest — high power stakeholders must be consulted and considered at every stage of change to gunner their support to get things done. They are the treasured suppliers and it is important that strategy to improve high service level and high response rate is necessary.
The model is useful in building profiles of key business stakeholders, it assist in building cross-functional relationships that smoothen communication.
The model has limitations in that it only assists in categorising stakeholders and does not provide the means to understand them and communicate appropriately.
Secondly, the measures of attractiveness and relative value do not have definitive means to achieve them. They are compound measures and it is the duty of the procurement professional to consider what their suppliers would regard as attractive and what relative value that supplier would put on the business.
It therefore requires employment of necessary skills in the procurement department to undertake this important activity that can dry competitiveness of businesses.
Nyasha Chizu is a Fellow of the Chartered Institute of Purchasing and Supply writing in his personal capacity. Feedback: firstname.lastname@example.org