Supplier Matrix, Define the Supplier Network Capability and Capacity
Building and improving a reliable supplier matrix that supports business and category objectives is a critical tool in driving a sustainable sourcing strategy.
Each category and sales channel may need a different sourcing network to facilitate market demand, speed and quality. The supplier matrix details the current and desired supplier network that meets the capability and capacity demand of all category channels.
Before the supplier matrix is defined, category spend and forecast demand analysis will be required. It is critical to ensure products are grouped correctly into spend categories that leverage suppliers across capability, capacity and agility to enable the best outcomes.
Category and product grouping from a manufacturing perspective is best split across manufacturing technique and raw material type. Multi-level categories will be necessary for speciality manufacturing, end consumer market regional requirement and lead time flexibility.
With category structure established and factors driving demand and supply risk in each sourcing region considered, the number of suppliers required per category must be set.
Supplier numbers will depend on the supplier capacity available versus the category procurement demand. At a minimum, there must be a main and backup supplier for the total demand allocated on an 80/20 split, capacity must account for the highest cyclical demand in the cycle with 25% buffer.
A key component of the supplier matrix is to limit total number of suppliers ensuring spend is leveraged, competition is maintained, sustainability, MOQ and speed to market objectives are achievable while delivering meaningful supplier partnerships, volume of scale is logical for logistic and quality management to minimise TCO, and supply risk is acceptable. Global supply chains will need multi-channel supply routes to accommodate the requirement of individual consumer markets adding to the complexity.
There must be an allowance for supplier on-boarding and trialling. Testing new suppliers or regions to explore capability and pricing options, mitigate trade risk and allowing room for outside the box supplier development is critical to ensuring an innovative and transformational sourcing platform that adds brand and customer value.
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Review of the supplier matrix must be in line with supplier score-carding, approximately every 2 to 3 months. Results of score carding will drive supplier scaling, descaling or replacement which are managed through the supplier matrix.
The supplier matrix and score-carding drive supplier improvement that meet business objectives requiring project management of all corrective action initiatives through collaboration with internal stakeholders and supplier partners.
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The supplier matrix defines category allocation, production build-up and capacity level suitable for the supplier’s capability that meet business objectives. It is a key tool that develops and continually improvements the Sourcing Strategy.
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