Segmenting supplies and suppliers: bringing together the purchasing portfolio matrix and the supplier potential matrix

Jafar Rezaei · Hamidreza Fallah Lajimi

75 citations0/0 files storedInternational Journal of Logistics Research and Applications

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Quality and Supply Management Multi-Criteria Decision Making Outsourcing and Supply Chain Management

Abstract

Supplier segmentation is one of the most important supply chain-related activities for most firms working with multiple suppliers. Purchasing portfolio matrix (PPM) is a segmentation method that considers two dimensions (profit impact and supply risk) against which the materials purchased by the company are classified. Despite its popularity, PPM has been the subject of serious criticism. A new approach to supplier segmentation, called supplier potential matrix (SPM), aims to fulfil the need for a unifying framework that includes all the important variables under two overarching dimensions: supplier capabilities and supplier willingness. While the focus of PPM is on supply, SPM mainly focuses on relationship. However, it is important to include both the supplies and the relationship with those who supply, the suppliers. The main purpose of this study is to bring these two approaches together through a hybrid matrix called PPM-SPM. Data is collected from a company working with 70 suppliers. Best worst method (BWM), is used to determine the weights of the criteria we need for the two segmentation approaches. The suppliers are segmented based on the two approaches. A combined PPM-SPM segmentation is then proposed and discussed. The results show that the combined approach improves supplier management.

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References

2005Multiple Criteria Decision Analysis: State of the Art Surveys 2014Best-worst multi-criteria decision-making method 2009Multi-criteria decision making approaches for supplier evaluation and selection: A literature review 2015Best-worst multi-criteria decision-making method: Some properties and a linear model 2006The relationships between supplier development, commitment, social capital accumulation and performance improvement 2008A green supplier selection model for high-tech industry 2005Modeling the metrics of lean, agile and leagile supply chain: An ANP-based approach 2004Supplier evaluations: communication strategies to improve supplier performance

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