Two Multi-criteria Approaches to Supplier Segmentation

Supplier segmentation is a strategic business activity whereby suppliers of a firm are categorized on the basis of their similarities. Instead of handling all suppliers separately, segmentation yields a manageable number of segments, each of which requires a similar strategy. Standard methods of supplier segmentation have serious shortcomings: they often use a limited number of criteria and do not capture the complicated interaction between different supplier aspects. There is often little by way of data that can be used to apply more advanced statistical segmentation approaches. In this paper, we use two overarching dimensions to capture all available segmentation criteria: supplier capabilities and supplier willingness. We propose two multi-criteria approaches to assess the position of suppliers with regard to these dimensions and subsequently that outcome to identify segments. These multi-criteria approaches, a fuzzy rule-based system and a DEA-like linear programming model are applied to a real-world case to demonstrate how the results can be used in practice. The results of the two approaches are compared and some strategies are suggested to handle different segments.