Category Segmentation Template

Introduction and instructions

1. Partner relationship management (SRM) overview

SRM elevates key relationships into mutually vested partnerships that deliver innovation and greater value for money. SRM is a change programme that requires the foundations of effective
risk, contract and performance management in place. The objective is for all departments to have a consistent approach to SRM.

2. Segmentation process overview

An important part of this project is to agree a more objective segmentation approach that can be adopted by agencies. This segmentation will be conducted in three steps:

Step 2
Step 1 Step 3
Partner
Category segmentation Stakeholder validation
segmentation

What? Segment categories according to their spend Segment Partner s within category, in order Validate the output of the segmentation
and criticality. of priority according o the outcome of step 1, process and obtain stakeholder buy-in.
based on criticality and potential value.

Why? Create a clear picture of how significant the
category is and indicate the most beneficial
SRM strategy to be adopted.
Differentiate between Partner s within the
same category and align the most
appropriate treatment strategy.
No segmentation model is 100% exhaustive.
Relevant stakeholders must be able to
challenge the output and identify factors not
considered within the model and exceptions.
Gain stakeholder support for the final
segmentation output.

3. Instructions

1. Review the list of categories that you agency currently has.

2. In the category questionnaire tab, write the name of the categories in row 7.

3. For each category, complete the category segmentation questionnaire by inserting in column F, H, J, ... the appropriate score for each criterion (further information can be
found in HELP tab)

4. In the tab called Spend Data, the name of all the categories will appear and information about the spend for each category will need to be populated.

5. Once the category questionnaire and the data tab are completed the results will be presented in the Category scores tab (hidden sheet) and a visual representation of the final
category segmentation results will be shown in the final output tab.
5. Once the category questionnaire and the data tab are completed the results will be presented in the Category scores tab (hidden sheet) and a visual representation of the final
category segmentation results will be shown in the final output tab.

1- In the 'category questionnaire' tab, review and adjust the

weighting of each criterion.

2 - Enter the name of the category under

consideration.

3 - For each category, enter values between 0

to 3 for each question.
 Risk/Challenge Risk / challenge

High
Medium
Regulatory risk
Low
N/A
High
Medium
Reputational risk
Low
N/A
Bottleneck
Strategic
Market characteristics
Leverage
Transactional
High
Medium
Impact on service delivery
Low
N/A
High
Medium
Impact on employees
Low
N/A
High
Medium
Operational criticality
Low
N/A
High
Medium
Innovation/Value Creating Potential
Low
N/A
High
Medium
Impact on agency objectives
Low
Impact on agency objectives

N/A

Total
Spend data Enter
category
spend data.
Category Names FY2021 Category Spend ($)
Category 1 $27,700,000.00
Category 2 $1,958,000.00
Category 3 $7,803,000.00
Category 4 $5,197,000.00
Category 5 $2,127,000.00
Category 6 $4,063,000.00
Category 7 $1,972,000.00
Category 8 $26,815,000.00
Category 9 $3,435,000.00
Category 10 $10,074,000.00
0
0
0
0
0
0
0
0
Grand Total $91,144,000

* INSERTED FIGURES ARE AN EXAMPLE

Enter
category
spend data.
Category Segmentation - Final output summary

Segmentation Output

30
High

Managed
Category 1
Category 8

25

20
Spend ($)

15
0 50 100 150 200 250
Tactical

Category 10
10

Category 3

Category 4
5 Category 6
Category 9
Category 7 2
Category Category 5

0
 Category 4
5 Category 6
Category 9
Category 7 2
Category Category 5

0
Low
Criticality
 Risk/Challenge

Regulatory risk

Reputational risk

Market characteristics

Impact on service delivery

Impact on employees
 Operational criticality

Innovation/Value Creating
Potential

Impact on IKEA objectives

 Scoring Details

High = The risk is significant and difficult to fully mitigate

Likelihood = medium to high
Severity = high - certain legal action, financial impact (fines) plus reputational damage
Medium = The risk is significant but can be effectively mitigated
Likelihood = low to medium
Severity = medium to high - possible legal action, financial impact (fines) plus reputational damage
Low = The risk is not significant
Likelihood = low
Severity = low to medium - low level financial impact and low reputational damage
N/A = This spend category does not expose IKEA to potential regulatory and compliance risk.
High = The risk is significant and difficult to fully mitigate.
Likelihood = medium to high
Severity = high - widespread negative publicity, definite loss of customer and investor support
Medium = The risk is significant but can be effectively mitigated
Likelihood = low to medium
Severity = medium to high - some short term negative publicity with limited effect on customer and investo
Low = The risk is not significant
Likelihood = low
Severity = low to medium - unlikely to result in negative publicity or loss of customer and investor support.
N/A = This spend category does not expose IKEA to potential reputational risk.
Bottleneck = The category is critical to Ikea and spend is relatively low. The market has a limited number of
risk of change or substitution is high. IKEA has relatively low spend in this category provides the Partners w
Strategic = The category is critical to Ikea and spend is relatively high. It's likely the market has a limited nu
cost and risk of change is high. However, the level of spend that Ikea brings to the category provides it with
Leverage = The category is less critical to IKEA and spend is relatively high. The market has sufficient qualif
competition. The cost and risk of change or substitution is relatively low. This situation provides IKEA with g
Transactional = The category is not considered critical to IKEA. The market is very competitive and the cost
low. However, IKEA spend is not sufficient to exercise more than transactional leverage.
High = The risk is significant and difficult to fully mitigate.
Likelihood = medium to high
Severity = high - a significant impact to service delivery immediately.
Medium = The risk is significant but can be effectively mitigated
Likelihood = low to medium
Severity = medium to high - The service delivery would be compromised for a short period.
Low = The risk is not significant
Likelihood = low
Severity = low to medium - unlikely to result in significant impact on service delivery.
N/A = This spend category does not expose IKEA to any risk impact.
High = The risk is significant and difficult to fully mitigate.
Likelihood = medium to high
Severity = high - A significant impact would be felt by a large number of employees immediately.
Medium = The risk is significant but can be effectively mitigated
Likelihood = low to medium
Severity = medium to high - Some employees would be affected for a short period.
Low = The risk is not significant
Likelihood = low
Severity = low to medium - unlikely to result in significant impact on employees.
N/A = This spend category does not expose the IKEA to any employee related risk.
High = (critical/catastrophic) The risk is very significant and difficult to fully mitigate.
Likelihood = medium to high
Severity = high - Severe financial or reputational impact.
Medium = (significant) The risk is significant but can be effectively mitigated.
Likelihood = low to medium
Severity = high - Operational activity can be restored but full recovery could take up to 12 months.
Low = (marginal) The risk is relatively low and can be effectively mitigated.
Likelihood = low
Severity = low- Operational activity can be quickly restored and full capability restored within 6 months.
N/A = The spend category represents no appreciable risk (negligible) to IKEA's operations.
High = High level of impact to customer interests (aesthetics, functionality, overall design)
known or expected value-creating opportunities = medium to high
Level of current supply chain efficiency is known to be low or future outlook is growth
Medium = Some level of impact to customer interests (aesthetics, functionality, overall design)
known or expected value-creating opportunities = low to medium
Level of current supply chain efficiency is marginal and can benefit from optimisation
Low = Minimal contribution to customer interests
Value-creating opportunities = low or unknown
Level of current supply chain efficiency is adequate or limited category growth expected
N/A = No direct connection to primary customer interests for the product
Well-developed category and supplier base or criticality of category receding in the future
High = This spend category is one that is considered vital to achieving IKEA strategic objectives
Medium = This spend category is one that is considered important to achieving IKEA strategic objectives
Low = This spend category is one that is considered less important to achieving IKEA strategic objectives

N/A = This spend category is one that is not considered important to achieving IKEA strategic objectives
 Detailed Explanation of Risk/Challenge Back

This spend category exposes IKEA to potential regulatory and compliance risk as a
result of a failure by the supplier and/or ineffective supplier management.
Aspects of regulatory and compliance risk to consider related to this category include
but are not limited to:
- Partners will be in possession of / or have access to confidential data
- Partners will interact directly with IKEA's consumers
- Partners will carry out regulated activities or transactions on behalf of your IKEA

This spend category exposes IKEA to potential reputational risk as a result of a failure
by the supplier and/or ineffective supplier management.
Aspects of reputational risk to consider related to this category include but or not
limited to:
- Partners interact directly with your IKEA's consumers.
- The category has inherent risks that would impact on you IKEA's brand and
reputation.

This spend category market has the following characteristics in the way it relates to
IKEA.

This spend category exposes IKEA to potential risk as it has a direct impact on service
delivery.
Aspects of risk related to this category to consider include but are not limited to:
- Partners interact directly with IKEA's consumers either face to face, on the phone or
via online chat activities.
- Partners provide products or services that go directly to consumers.
- If the services the Partners provide failed, the impact would be felt by consumers.

This spend category exposes IKEA to potential risk as it has a direct impact on
employees.
Aspects of 'impact on employee' risk related to this category to consider include but
are not limited to:
- Partners provide products or services that have a direct impact on employee health,
welfare and productivity (high service requirements).
This category is critical to the operation of IKEA.
Aspects of operational risk related to this category to consider include but are not
limited to:
- What would be the impact of failure?
- What steps would be required to recover?
- How long would it take if the supplier closed their doors tomorrow?

Certain spend categories are well-established and achieving full potential while others
remain unoptimised with untapped benefit realised due to resource or lack of
adequate partners.
Examples of 'value-creating potential' within a category may include:
- part / material rationalisation reducing variation and economising cost of
manufacture
- bring indepth knowledge to design either supplementing or replacing internal
resources

Certain spend categories have the potential to contribute more or less to the strategic
objectives of IKEA.
Aspects of 'impact on IKEA objectives' to be considered includes but is not limited to:
- How innovation in this category could contribute to IKEA's objectives.
- How driving continuous improvement and efficiency in this category could contribute
to IKEA's objectives.

Back