🛒 Procurement & Supply Chain
Professional procurement
Procurement tools applied to negotiation: Kraljic matrix (HBR, 1983), total cost of ownership, target costing, auctions, SRM; work by P. Kraljic, A. van Weele, R. Monczka.
Full detail in the “Origin & history” section below.
Author of the library
Negotiation lecturer at KEDGE Business School
A rare threefold background serving negotiation: teaching, commercial justice and audit, backed by experience as a company director in Bordeaux.
Supplier segmentation consists of classifying a purchasing panel not uniformly but according to the strategic value and supply risk of each relationship, in order to finely tailor the negotiation effort. One typically distinguishes strategic suppliers (long-term partnership), leverage suppliers (competitive tendering to capture margin), critical/bottleneck suppliers (securing supply) and non-critical suppliers (simplification and automation). The principle: one does not negotiate a unique, vital component and an interchangeable office supply in the same way. Done well, segmentation transforms a diffuse balance of power into a differentiated strategy, category by category, that allocates time and bargaining power where they create the most value.
At a glance
Vigilance: low (3.0/10) · Preparation required: 9/10
Indicative profile: it situates the “Procurement & supply chain” family as the Procurement & Supply Chain school practises it, not this technique taken in isolation. Techniques from the same family and school therefore share the same profile. NEGOCOACH editorial rating out of 10, non-experimental · the higher the “relational risk” value, the more costly the technique is to the relationship.
NEGOCOACH assessment
Tactical potential 5.7/10 (effectiveness, impact, discretion) and vigilance low (relational and ethical risk): two distinct readings, deliberately never merged into a single score that would reward risk. NEGOCOACH editorial rating calibrated from the “Procurement & supply chain” family and the “Procurement & Supply Chain” school. Each criterion is rated out of 10; click to understand what it measures.
How far the technique can carry the negotiation in the intended direction when it is well executed.
Strength of the effect produced on the counterpart's perceptions, emotions and decisions.
How hard it is for the other party to notice the technique is being used. A high value = very discreet.
The information, analysis and rehearsal required upfront to use it effectively.
Potential cost to the relationship and to trust if the technique is spotted, refused or fails. A high value = riskier.
Moral acceptability: fairness, transparency and respect for the counterpart's autonomy. A high value = more defensible.
Documented school
The school this technique stems from is documented by recognised work and established practice, without experimental consensus. This indicator qualifies the school, not this technique taken in isolation.
Indicative NEGOCOACH editorial rating, for teaching purposes. For “Relational risk”, a high value signals a cost to the relationship, not a quality.
The reference tool is the Kraljic matrix, published by Peter Kraljic in the Harvard Business Review in 1983 under the title "Purchasing Must Become Supply Management". At a time when purchasing was still essentially transactional and price-focused, Kraljic proposed mapping purchasing categories along two axes, profit impact and supply risk, in order to derive four families (strategic, leverage, bottleneck/critical, non-critical) and distinct strategies. This 2×2 matrix has become a cornerstone of procurement transformations, of business-school teaching and of Supplier Relationship Management (SRM) practices. Supplier segmentation proper is its extension: one moves from segmenting purchasing categories to segmenting the suppliers themselves, in order to steer the relationship and the negotiation posture.
Supplier segmentation is a method for classifying the purchasing panel that generally cross-references two dimensions: the criticality/impact of the supplier on the company's performance and value, and the associated risk (scarcity of supply, dependence, switching cost, fragility of the supply chain). Crossing these axes produces segments, most often four, to which a coherent relationship strategy and negotiation posture are attached: collaborative partnership and long-term contracts for strategic suppliers; competitive tendering, auctions and price arbitrage for leverage suppliers; securing supply, safety stocks and alternative sources for critical/bottleneck suppliers; standardisation, automation and reduction of processing costs for non-critical suppliers. Operationally, one maps the panel (spend data, number of sources, share of market captured), positions each supplier, then defines for each segment its objectives, tactics and mode of relationship governance.
Application by context
A sales director segments their client portfolio along the same logic: strategic accounts handled through long-term partnership and integrative negotiation, volume accounts placed in price competition, calibrating the intensity of the commercial effort to the value and the risk of loss.
The buyer maps their panel by profit impact and supply risk, places each supplier in one of Kraljic's four quadrants, and applies the dedicated strategy: co-development with strategic suppliers, aggressive tenders on leverage suppliers, dual sourcing on bottlenecks, automated catalogue on non-critical items.
In labour negotiation, management segments its union counterparts according to their representativeness and their capacity to block, reserving substantive discussions and long-term trade-offs for pivotal organisations, and a more standardised treatment for peripheral issues.
In supply crisis management (shortage, supplier failure), segmentation serves as a triage plan: one immediately concentrates negotiation and supply-securing resources on the critical and strategic suppliers whose stoppage would halt production.
A political negotiator classifies their coalition partners according to their decisive weight and the uncertainty of their support, investing political capital and lasting concessions in pivotal allies, and managing acquired or marginal support more sparingly.
A developer segments their service providers (structural engineering firm vs. commoditised supplies): they lock in the rare and critical trades of the site through framework contracts and a partnership relationship, and systematically place the standardised, high-volume lots in competition.
In a cross-cultural context, segmentation helps calibrate the relational register: with a strategic supplier from a relationship-driven culture (guanxi, high-context), one invests in the long-term bond, whereas a transactional culture and a leverage segment call for a more direct negotiation on price.
In a family negotiation (division, budget, custody), one implicitly distinguishes the vital and enduring matters, on which one seeks a partnership-based and lasting agreement, from the secondary and one-off trade-offs that one settles quickly to preserve one's energy for what is essential.
Counter-techniques
Negotiation is also played on defence. Here is how to recognise this technique when it is used against you, and turn it around.
The signals that give it away
The counters that defuse it
Turn it into an advantage
Name the manoeuvre: said out loud, a technique loses most of its power.
Reacting emotionally instead of coming back to the facts.
Strengths: segmentation brings strategic clarity by avoiding the dispersion of negotiation effort, it aligns the posture (cooperative vs. competitive) with the reality of the balance of power, it secures critical supplies and professionalises the supplier relationship (SRM). Simple to understand and to communicate, the 2×2 matrix is an excellent aid to decision-making and internal alignment. Weaknesses: the classification can be static and quickly outdated while risks and markets evolve; a supplier's positioning remains partly subjective and sensitive to the quality of spend data; the logic risks freezing relationships (an under-invested supplier classified as "non-critical" can become an ignored bottleneck); finally, the matrix reflects the buyer's view, not the supplier's, who runs their own segmentation of their clients and may not judge you strategic.
To be used when building or reviewing a procurement/category strategy, when the panel is broad and heterogeneous and negotiation resources are limited. It is particularly useful for preparing an annual negotiation campaign, deciding where to place a partnership vs. competitive tendering, mapping and reducing supply-chain risks, or steering an SRM programme. More broadly, whenever a negotiator faces numerous counterparts of unequal importance, segmenting allows prioritisation. It is less relevant for a one-off, isolated negotiation with no portfolio to arbitrate.
Business · Kraljic and the birth of supply management (1983), In his founding Harvard Business Review article, Peter Kraljic illustrates the approach through industrial companies confronted with the vulnerability of their supplies (raw materials, energy, components) in the wake of the oil shocks. He shows that a company treating all its purchases uniformly under-negotiates its strategic categories and over-administers its commonplace purchases. By mapping profit impact and risk, it reallocates its best negotiators to critical partnerships and industrialises the rest. This framework moved purchasing from a transactional function to a strategic one and remains, forty years on, the reference taught in supply chain.
Business · Representative scenario: the equipment maker who re-segments after a disruption, Representative scenario (unattributed). An automotive equipment maker suffers the stoppage of a sole supplier of a cheap electronic connector with no immediate substitute: a part classified as "non-critical" because of its low cost was in reality a very high-risk bottleneck. After the incident, the company re-segments its panel no longer on spend alone but by incorporating the risk of disruption and the switching cost. Result: dual sourcing and safety stocks on bottlenecks, tenders maintained on leverage suppliers, and reinforced partnerships on strategic suppliers, the negotiation posture becomes differentiated by segment.
On the supplier's side, a negotiation driven by segmentation is recognisable through clear signals: systematic competitive tendering and price pressure (you are classified as "leverage"), or on the contrary a desire for a framework contract and co-development (you are "strategic"). To defend itself, a supplier increases its perceived criticality and its substitution risk: technical differentiation, innovation, intellectual property, service quality, high switching costs, exclusivities. It can also run its own client segmentation and refuse to grant a buyer using "leverage" the terms of a partner. Faced with a buyer who commoditises you, the counter is to demonstrate a value that moves you up from the "non-critical/leverage" quadrant towards "strategic", or to secure guaranteed volumes in exchange for price concessions.
Segmentation is a decision-support tool, not an objective truth: its axes are partly subjective and depend on data quality. It simplifies a complex relational reality into four boxes and can induce mechanical decisions ("this supplier is leverage, so we crush the price") disconnected from real value. On the ethical plane, aggressive distributive use on "leverage" segments, reverse auctions, permanent pressure, can weaken suppliers (particularly SMEs) and, in time, impoverish the subcontracting fabric and the chain's resilience. Responsible segmentation therefore incorporates the sustainability of the relationship, fairness and systemic risk, not just short-term gain. It never dispenses with human judgement on each relationship.
Variants and related tools: the Kraljic matrix (profit impact × risk) and its derivatives; SRM segmentation and "supplier tiering" models (tier 1/2/3 suppliers, partners vs. transactional); Supplier Preferencing / the mirror view, which analyses how the supplier perceives you (nuisance, exploitable, development, core); ABC analysis / the Pareto principle (80/20) on spend; portfolio analysis and category management; supply-chain risk maps (dependence, resilience). All share the same intuition: differentiate treatment according to value and risk, and articulate it with the BATNA/walk-away point of each relationship.
Quick exercise
Answer in your head, then reveal the solution. Memory is built through active recall.
Frequently asked questions
Supplier segmentation consists of classifying a purchasing panel not uniformly but according to the strategic value and supply risk of each relationship, in order to finely tailor the negotiation effort. One typically distinguishes strategic suppliers (long-term partnership), leverage suppliers (competitive tendering to capture margin), critical/bottleneck suppliers (securing supply) and non-critical suppliers (simplification and automation). The principle: one does not negotiate a unique, vital component and an interchangeable office supply in the same way. Done well, segmentation transforms a diffuse balance of power into a differentiated strategy, category by category, that allocates time and bargaining power where they create the most value.
Yes. Used in good faith it stays within a fair negotiation: it structures the exchange without deceiving the other party. Being transparent about your intentions strengthens the long-term relationship.
Reacting emotionally instead of coming back to the facts. The right reflex: slow down and reformulate.
NEGOCOACH does not assess the experimental validation of this technique in isolation. What we document is the grounding of its source school (Procurement & Supply Chain): documented school. Full detail is in the "At a glance" section of this page.
Practise with AI
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Rehearse against an AI counterpart
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Analyse a past negotiation
Here is how my negotiation went: [paste the exchanges]. Analyse whether the "Supplier Segmentation" technique was used well, what worked, the mistakes made, and spell out precisely what I could have done better.
References
Founding works of the 🛒 Procurement & Supply Chain school this technique belongs to.
Purchasing Must Become Supply Management (Harvard Business Review)
ArticleP. Kraljic · 1983
Purchasing and Supply Chain Management
BookA. J. van Weele · 2018
Purchasing and Supply Chain Management
BookR. M. Monczka et al. · 2015
Category Management in Purchasing
BookJ. O'Brien · 2019
Procurement tools applied to negotiation: Kraljic matrix (HBR, 1983), total cost of ownership, target costing, auctions, SRM; work by P. Kraljic, A. van Weele, R. Monczka.
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Technique map
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See the counter-techniquesSupplier segmentation consists of classifying a purchasing panel not uniformly but according to the strategic value and supply risk of each relationship, in order to finely tailor the negotiation effort. One typically distinguishes strategic suppliers (long-term partnership), leverage suppliers (competitive tendering to capture margin), critical/bottleneck suppliers (securing supply) and non-critical suppliers (simplification and automation). The principle: one does not negotiate a unique, vital component and an interchangeable office supply in the same way. Done well, segmentation transforms a diffuse balance of power into a differentiated strategy, category by category, that allocates time and bargaining power where they create the most value.
Name the manoeuvre: said out loud, a technique loses most of its power.
Reacting emotionally instead of coming back to the facts.
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