I have quite a lot of suppliers for different areas of my business. How do I go about organising them and focusing my energy?
- Arrange your suppliers into four tiers: 1 = Most spend,… through to 4 = least spend.
- Categorise your suppliers within each tier.
- Start with Tier 1, as this is where you get the largest return for your money.
- Note any key dependencies on small spend suppliers.
By tom lauren . Published: 2019/03/25 11:48:21 AM, Last Updated: 2019/08/11 12:45:48 PM Answer URL
Start with the value. Collate your spend data and allocate it by individual supplier, this will then show you where you are spending your money.
Place your suppliers into tiers based on this value. Typically this is 4 tiers, 1 being the highest, 4 the lowest.
We are not saying ignore your lowest tier but these will deliver the least return for your time. Start with the highest ones – a few % saving on a lot of money is always worth having.
Then, place into separate categories based on spend type – do not change the tier!
Once you can see what you are spending by type and how many suppliers you are using to do this, more often or not it makes sense to consolidate your spend. Fewer suppliers who receive more work will generally provide a better service at a better price.
You might find there are suppliers that you rely upon, although they don’t get much in the way of money from your business – don’t ignore them! Note these key dependencies as you go.