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Sourcing & Suppliers

Supplier Segmentation

Supplier segmentation is grouping suppliers into categories based on factors like spend, risk and strategic importance so each group can be managed appropriately.

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Not every supplier deserves the same attention. Segmentation sorts the supply base — often by spend value and supply risk — into tiers such as strategic, leverage, bottleneck and routine, so effort is focused where it matters most. Strategic suppliers get active relationship management; routine ones are handled through catalogues and automation.

Segmentation is the foundation for supplier relationship management and category strategy. A common tool for it is the Kraljic matrix, which plots suppliers by profit impact and supply risk to guide the right approach for each quadrant.

Key points

  • Segments suppliers by spend, risk and strategic importance.
  • Focuses management effort on high-value, high-risk relationships.
  • Often visualised with the Kraljic matrix.

Frequently asked questions

What is supplier segmentation?
Supplier segmentation is grouping suppliers by factors such as spend, risk and strategic importance so each group receives an appropriate level of management effort.
How does supplier segmentation help procurement?
It focuses attention where it delivers most value — active management for strategic suppliers and efficient, automated handling for routine ones — improving both outcomes and productivity.

Go deeper

Supplier management guide

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