Segment Suppliers by Conversation, Not Just Spend

Every procurement function segments its suppliers, and most do it the way the textbooks teach, by plotting spend against supply risk. The Kraljic logic that sits underneath this is genuinely useful: it tells you that a high-spend, low-risk leverage supplier should be worked competitively, that a low-spend, high-risk bottleneck supplier needs securing, that a high-spend, high-risk strategic supplier warrants real attention, and that the long tail can be left mostly alone. As a way of deciding where to apply commercial effort, this is sound, and a function that segments nothing is spreading its attention evenly across suppliers that deserve wildly different amounts of it. The trouble starts when the same grid is used, silently, to decide something it was never built to decide: where to invest in the relationship.

This series has argued that the relationship is managed in conversations. If that is true, then the question of which suppliers deserve relationship investment is really the question of which suppliers are worth investing conversations in, and that does not line up neatly with how much you spend or how much risk a spreadsheet assigns. Spend tells you how much money flows through a supplier. It does not tell you whether a better conversation with them would change anything, and that second question is the one relationship investment should actually answer.

Where spend and conversation come apart

Consider the high-spend supplier of a true commodity, bought to a fixed specification in a competitive market. They sit firmly in the leverage box, and the segmentation says they are commercially important, which they are. But the value you get from them is captured almost entirely in the price mechanism, the tender, the benchmark, the willingness to switch. A deeper relationship with them changes very little, because there is little a conversation can unlock that the market does not already price. Pouring quarterly relationship effort into this supplier feels diligent and produces almost nothing, because the conversation is not where the value with them lives.

Now consider the opposite case, the supplier who barely registers on spend but whose relationship you will one day desperately need. The small specialist whose component has no qualified alternative. The vendor whose engineering team, if they take your call, can solve a problem that would otherwise stop a line. The mid-tier supplier who will quietly deprioritise you during the next shortage if the relationship is purely transactional, and quietly protect you if it is not. None of these light up a spend-based segmentation, and all of them are suppliers where a genuine relationship, built through real conversations, changes the outcome materially. The grid that sorts by money would have you under-invest in exactly the relationships that will matter most when conditions turn.

The axis that actually matters

The useful question for relationship investment is narrow and concrete: for which suppliers would a better conversation produce a materially different result? For some suppliers the honest answer is none, and that is not a failure, it is a reason to keep the relationship efficient and transactional and spend the relationship effort elsewhere. For others the answer is a great deal, because what you need from them is access to innovation, priority under scarcity, flexibility the contract does not compel, or early warning of a problem, and every one of those is unlocked in a conversation rather than a clause. Those are the suppliers worth the scarce, expensive investment of real relationship effort, regardless of where they sit on the spend axis.

This reframes segmentation as a tool for allocating something most functions never name as scarce: the capacity to have high-quality supplier conversations. There is only so much of it, because it depends on people and their time and their skill, and spreading it evenly, or worse, allocating it by spend, wastes it on relationships that do not need it and starves the ones that do. Our piece on when partnership is the wrong frame makes the related point that the language of partnership is often misapplied; this is the operational version of the same discipline. Decide, deliberately, which relationships are worth a real conversation, and stop pretending the others are.

Investing the conversation where it counts

Getting this segmentation right is only half of it, because identifying the suppliers where conversations matter does nothing unless someone can actually have those conversations well. The supplier where a relationship unlocks priority during a shortage is also the supplier where that priority has to be negotiated, in a conversation that asks for something the contract does not require, against an account manager balancing many customers. The low-spend specialist whose goodwill you need is one you have to earn it from, in exchanges where you have little commercial leverage and have to rely on the relationship itself. These are not easy conversations, and they are the ones the segmentation has just told you are worth the most.

That is where this connects back to the rest of the series and to what Voice2Evolve is for. Once you have decided which suppliers are worth investing conversations in, the value of that decision is realised only through the capability to carry those conversations when they happen. Segmenting by conversation tells you where to point the scarce resource. Building the capability to have the conversation is what turns the decision into an outcome, and it is a capability a procurement team can practise and develop deliberately, against the specific kinds of conversations the most valuable relationships actually require.