---
title: Supplier Segmentation: Definition and How It Works | Aavenir
url: https://aavenir.com/glossary/supplier-segmentation/
description: Supplier segmentation is grouping suppliers by criteria such as spend, risk and importance, so limited resources go where they make the most difference.
updated: 2026-11-07
---

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# What is supplier segmentation?

Supplier segmentation is grouping suppliers by criteria such as spend, risk and importance, so limited resources go where they make the most difference.

## Why segment suppliers

It is impractical to monitor or work closely with every supplier. Strategic or critical suppliers need far more engagement than routine ones, and segmentation decides what type and degree of attention each supplier gets. It is a core part of a supplier relationship management strategy.

## Common segments

- **Strategic.**High spend and high importance. Close partnership and regular reviews.

- **Bottleneck.**Low spend but hard to replace. Manage supply risk.

- **Competitive.**High spend with many alternatives. Compete and negotiate.

- **Routine.**Low spend and easy to replace. Keep buying simple.

## Choosing the criteria

Most companies combine spend with how critical the supplier is and how hard it would be to replace. Risk, such as data access, regulation or financial health, and the value of innovation from the supplier are also common inputs.

## How Aavenir handles it

[Aavenir Atlas](https://aavenir.com/solutions/ai-contract-intelligence/) answers questions across the contract portfolio, such as which suppliers hold critical data or have no termination right, which feeds segmentation. [Obligationflow](https://aavenir.com/solutions/contract-obligation-management-software/) then tracks the obligations that matter most for strategic suppliers.

## Keep reading

[Supplier relationship management Supplier relationship management is a planned way of managing suppliers by how much each one matters to the business. Read more](https://aavenir.com/glossary/supplier-relationship-management-srm/)[Supply base management Supply base management is managing the full set of suppliers a company buys from, current and future. Read more](https://aavenir.com/glossary/supply-base-management/)[Category management Category management organizes buying into groups of related spend, each with its own strategy. Read more](https://aavenir.com/glossary/category-management/)

Frequently asked questions (FAQ)

## Common questions

###

### What is the Kraljic matrix?

A common segmentation model that plots suppliers or categories by profit impact and supply risk, giving four groups: strategic, bottleneck, routine and a fourth group of high spend items with many alternatives, often managed through competition. [Read about the supply positioning model](https://aavenir.com/glossary/supply-positioning-model/).

###

### How often should suppliers be re-segmented?

Yearly, or when something important changes, such as a large shift in spend, a new risk or a supplier becoming hard to replace. [Read about supply base management](https://aavenir.com/glossary/supply-base-management/).

###

### What do you do differently for each segment?

Strategic suppliers get partnership, joint plans and frequent reviews. Suppliers with many alternatives get competitive sourcing. Bottleneck suppliers get risk plans. Routine suppliers get simple, low effort buying. [See Obligationflow](https://aavenir.com/solutions/contract-obligation-management-software/).

Have a question we have not answered? [Ask the Expert](https://aavenir.com/contact/)

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## See your contracts run on one record.

- **1****A 30 minute walkthrough**Built around your team, whether that is procurement, legal, IT or finance.

- **2****Your contracts, not ours**Bring a few sample agreements and watch Aavenir AI extract and review them.

- **3****ServiceNow or standalone**We show the deployment that fits the systems you already run.

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