There are many suppliers in the market at present. To do a good job in selecting suppliers, we must first classify the suppliers.
(I) Classification according to the 80/20 principle
According to the 80/20 principle, suppliers are divided into two categories according to the importance of the products: key suppliers and ordinary suppliers, that is, suppliers that account for 80% of the value (about 20% of the total number of suppliers) are key suppliers, and the remaining suppliers that only account for 20% of the value (about 80% of the total number of suppliers) are ordinary suppliers. For key suppliers, enterprises should invest 80% of their time and energy in management and improvement. The products provided by these suppliers are the key procurement products of the enterprise; while for ordinary suppliers, it is enough to invest only 20% of time and energy, because the products provided by such suppliers have less impact on the cost, quality and production of the enterprise.
The types of suppliers subdivided according to the 80/20 principle are not static. With the adjustment of the product structure and product line of the operation, enterprises should reclassify them in a timely manner.
(II) Classification by the depth of cooperation relationship
According to the cooperation relationship between the purchaser and the supplier, in order from shallow to deep, suppliers are divided into five categories: short-term target type, long-term target type, penetration type, alliance type and vertical integration type.
1. Short-term target type
The short-term target type refers to the transaction relationship between the purchaser and the supplier, that is, the general buying and selling relationship. The transaction between the two parties only stays on the short-term transaction contract. Both parties are concerned about how to negotiate, how to improve their negotiation skills and bargaining power, so that they can gain an advantage in the negotiation, rather than how to improve their work to make both parties profitable. The supplier provides standardized products or services according to the contract requirements to ensure that each transaction goes smoothly. After the transaction is completed, the relationship between the two parties is terminated. The contact between the two parties is limited to the purchasing staff of the enterprise and the sales staff of the supplier. People from other departments generally do not participate in the business activities between the two parties.
2. Long-term target type
The long-term target type refers to the long-term relationship between the enterprise and the supplier. Both parties are interested in improving their respective work for the common interests, and on this basis, establish cooperation beyond the buying and selling relationship. The characteristic of the long-term goal type is to establish a partnership. The focus of the work of both parties is to start from the long-term interests, cooperate with each other, continuously improve the quality of products and services, jointly reduce costs, and improve the competitiveness of both parties. The personnel involved in the cooperation are spread across multiple departments within each enterprise. When the enterprise puts forward new technical requirements to the supplier, and the supplier is not yet able to achieve them, the enterprise may provide technical and financial support to the supplier. Of course, the supplier’s technological innovation will also provide opportunities for the company’s product improvement, and this is also the reason why the company provides support to the supplier.
3. Penetration type
The penetration type is developed on the basis of the long-term goal type relationship. Its guiding ideology is to regard the other party as a part of its own enterprise, and the degree of mutual concern is greatly improved compared with the above two. In order to be able to participate in the activities of the other party, the enterprise will even take some appropriate measures on property rights (mutual investment, equity participation, etc.). At the same time, both parties should also take corresponding measures in organization to ensure that personnel are sent to join the relevant business of the other party. The advantage of doing so is that you can better understand the situation of the other party: the supplier can understand what role their products play in the enterprise, which is convenient for finding improvement directions; and the enterprise can also understand how the supplier manufactures the product, so as to put forward feasible improvement suggestions.
4. Alliance type
The alliance type relationship is proposed from the perspective of the supply chain. Its characteristic is the relationship between management members in a longer vertical chain. It is more difficult for both parties to maintain the relationship and the requirements are more stringent. The increase of alliance members often requires the enterprise at the core position of the supply chain to coordinate the relationship between the members. This enterprise is often called the core enterprise in the supply chain.
5. Vertical integration type
Vertical integration is one of the most complex relationship types, that is, integrating the enterprises in the supply chain to make them like one enterprise. Each enterprise is still a completely independent enterprise and has its own decision-making power. Under this relationship, each enterprise must fully understand the goals and requirements of the supply chain, and consciously make decisions that are beneficial to the overall interests of the supply chain rather than the individual interests of the enterprise under the condition of fully mastering the relevant information.