What is Supply Positioning Model?
The supply positioning model is a way to classify a spend portfolio based on risk and opportunity.
The supply positioning model enables an organization to segment its supplies as per the pricing and vulnerability associated with the business - in an eventuality of supplier failure.
Understanding Supply Positioning Model
Supplier positioning refers to identifying the spending with a supplier related to the supply risk and profit potential. Furthermore, it assists in making a priority of categories to identify and develop the appropriate strategy.
Supply positioning is an effective analysis tool that helps organizations map the priority of purchasing an item concerning its complexity within the market. It helps to identify the risks associated with two variables and then spends, which form the crux of supply agreement while determining commercial relationship.
Depending on the features, you can identify procurement into four significant areas- strategic, routine, non-critical, or bottleneck. Similarly, the suppliers can determine the supply-based activity for the goods and create a proper plan for purchase and supply relationship with the suppliers concerning the supply based on the above criteria.
Benefits Of Supply Positioning Model
The supply positioning model paves the way for solid communication and easy-to-understand manners. It will help convince the various departments on what one has to do as it allows them to map the priorities regarding the current situation.
Identifies the areas with benefits and risks
One of the major highlights of the model is that it helps identify the places as per their utility and risks. As a result, it will impact the purchase decision, which will further help the company enhance its bottom line by reducing costs and improving efficiency.
Disadvantages Of Supply Positioning Model
While the supply positioning model has various benefits, there are certain disadvantages. Some of them include:
- There is no acknowledgment of supply risks for the relationship between supplier and customer, which can further be affected due to external and PESTEL factors.
- It disregards the supplier's reactions and strategies that may come into effect.
- The model does not identify the importance of the buyer-seller relationship.
- Improvements in the model can further prevent the relationships from flourishing, impacting the market's changing dynamics. It may also affect the relationships of the parties that are involved.