As procurement professionals, we often spend significant time categorising our products, services, and suppliers. But how often do we stop to consider how our suppliers view us? The Supplier Preferencing Matrix is a valuable tool that shifts perspective, helping us manage supplier relationships more effectively by understanding how we’re perceived from the supplier’s side.
What is the Supplier Preferencing Matrix?
This matrix allows procurement teams to assess how attractive their organisation is to individual suppliers. By plotting attractiveness against spend level, we gain insight into how suppliers may prioritise or approach the relationship (Steele and Court, 1996). Let’s explore each quadrant and what it reveals about the supplier’s view.
Figure 1: Supplier Preferencing Matrix (Steele and Court, 1996).
Core Account: The Ideal Positioning
As a buying organisation if we spend a lot of money with a supplier and we are an attractive account we will be positioned as core. An attractive account is one that pays on time, communicates well, promotes innovation, builds trust, is ethically aware, forward thinking, environmentally friendly and sustainability focused.
A core account from a supplier’s perspective should, ideally, map to a strategic account from the procurement/buyer’s perspective. If this is so, both organisations are interdependent on each other and the relationship is likely to be long term and beneficial.
High Attractiveness, Low Spend: Opportunities for Growth
If our business is seen as highly attractive but low spend, the supplier may seek to develop the relationship. This could be that there is a lot of potential spend or that the supplier sees the buying organisation as a good strategic fit. Equally the supplier may seek to gain entry into a market they are currently blocked from and developing the relationship could benefit them in this way.
Avoiding Exploitation: Low Attractiveness, High Spend
The third quadrant is where the buying organisation is potentially exploited. This is because the amount of spend is high but the company is seen as having low levels of attractiveness. This could be because the business is unethical, does not pay on time or that they do not have a good reputation. In this situation a supplier may seek to take advantage and price above the average or reduce quality.
Nuisance Quadrant: Low Importance to the Supplier
The final quadrant is nuisance. Here the supplier sees the buying organisation as low importance. The buying organisation probably, or should have, these types of suppliers categorised as routine. The relationship is not valued, neither party relies on the other – they are independent of each other.
From categorising your suppliers from this angle you can see if you are seen in the right way from another perspective and ensure that your suppliers value you as much as you do them, and in turn that suppliers that you don’t seek to develop long term, strategic relationships with have the same expectations.
Combining Models: Using the Kraljic Model and Supplier Preferencing Matrix
The Kraljic Matrix helps buyers assess how they should view their suppliers, while the Supplier Preferencing Matrix helps buyers assess how suppliers see them (Steele and Court, 1996; Kraljic, 1983). Overlaying these models allows you to:
- Identify alignment or mismatches
- Prioritise supplier engagement
- Manage risk and opportunity
- Build stronger, mutually beneficial relationships
Figure 2: Combined Supplier Preferencing and Kraljic model
Regular Supplier Reviews
Relationship positions are not fixed. Over time, your suppliers’ views can shift, for better or worse. Review supplier placements regularly, especially when:
- Spend patterns change
- New stakeholders are introduced
- Performance improves or declines
- Strategic goals evolve
Monitoring these changes helps ensure that your organisation is seen in the right light and continues to benefit from optimal relationships.
Wrapping Up
Understanding supplier perspectives is vital in effective procurement management. The Supplier Preferencing Matrix offers a lens through which to assess these dynamics. By categorising relationships based on attractiveness and spend, organizations can ensure alignment between perceived and desired relationships. Regular reviews are essential to adapt to evolving dynamics. Integrating models like the Kraljic Model enhances this understanding, facilitating long-term strategic partnerships beneficial to both parties.
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