Procurement Glossary
Lot allocation: Strategic allocation of procurement volumes
November 19, 2025
Lot splitting is a central instrument in strategic Procurement, in which procurement volumes are specifically split across several suppliers or partial orders. This method enables companies to minimize risks, promote competition and strengthen negotiating positions. Find out below what lot splitting means, which methods are used and how you can successfully implement this strategy.
Key Facts
- Strategic distribution of the procurement volume across several suppliers to minimize risk
- Promotion of competition through targeted allocation of orders
- Strengthening the negotiating position with suppliers
- Reduction of dependencies and supply risks
- Optimization of cost-benefit ratios through strategic allocation
Contents
Definition: Lot splitting
Lot splitting refers to the strategic allocation of procurement volumes to several suppliers or subcontracts in order to spread risks and promote competition.
Basic principles of lot splitting
Lot splitting is based on the targeted segmentation of procurement volumes. Orders are divided up according to various criteria such as product categories, geographical regions or supplier capacities.
- Volume segmentation according to strategic aspects
- Consideration of supplier capacities and competencies
- Balanced risk distribution between different providers
Lot splitting vs. single sourcing
In contrast to single sourcing, where one supplier receives the entire volume, lot splitting deliberately distributes risks. This leads to greater security of supply, but can increase administrative complexity.
Importance of lot splitting in Procurement
The strategic importance lies in the optimization of the supplier portfolio. Through targeted lot formation, companies can strengthen their market position and increase operational efficiency at the same time.
Methods and procedure for lot splitting
The successful implementation of lot splitting requires structured methods and clear procedures for optimal volume distribution.
ABC analysis for lot splitting
The ABC analysis categorizes procurement objects according to value and strategic importance. A-goods are often given a 70/30 split, while C-goods can be split completely.
- A-goods: Strategic allocation with main supplier
- B-goods: Balanced distribution to 2-3 suppliers
- C-goods: Flexible allocation according to availability
Portfolio-based allocation strategies
Different procurement categories require different allocation approaches. The tendering strategy determines the optimal lot structure for each category.
Quantitative valuation models
Mathematical models support objective volume distribution. Scoring models evaluate suppliers according to defined criteria and enable data-based allocation decisions.
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Important KPIs for lot splitting
Measuring the success of lot splitting strategies requires specific key figures to evaluate efficiency and risk minimization.
Supplier concentration
The Herfindahl-Hirschman Index measures the concentration of the procurement volume. Values below 0.25 indicate a balanced distribution, while values above 0.5 indicate a high concentration.
- Calculation: Sum of the squared market shares
- Target value: 0.15-0.35 for optimal risk distribution
- Monitoring: Quarterly review of distribution
Security of supply
The probability of failure assesses the robustness of the supplier base. Supplier shortlists should contain at least three qualified alternatives per critical lot.
Cost efficiency of the allocation
The ratio of savings to additional costs through lot splitting shows the economic advantage. Positive values above 1.2 justify the increased complexity of the multi-supplier strategy.
Risks, dependencies and countermeasures
Despite its advantages, lot splitting involves specific risks that must be minimized by taking appropriate measures.
Complexity risks
Managing multiple suppliers increases administrative complexity and coordination effort. Unclear responsibilities can lead to quality problems and delivery delays.
- Increased management costs for supplier relationships
- Potential quality inconsistencies between suppliers
- Coordination problems with time-critical deliveries
Economies of scale losses
Splitting volumes can lead to reduced volume discounts. Price negotiations become more complex as different conditions have to be managed in parallel.
Strategic dependencies
Incorrect allocation quotas can create new dependencies. The allocation decision must therefore be carefully considered in order to ensure long-term flexibility.
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Practical example
An automotive manufacturer strategically divides its annual procurement volume of 50 million euros for electronic components between three suppliers: 50% to the main supplier, 30% to a second supplier and 20% to a third partner. This division considerably reduces the risk of default and enables continuous price comparisons. In the event of capacity bottlenecks, it is possible to switch flexibly between the suppliers.
- Risk reduction of 60% compared to single sourcing
- Cost savings of 8% due to increased competition
- Improved delivery flexibility in the event of fluctuations in demand
Trends & developments around lot splitting
Modern technologies and changing market conditions are shaping the further development of lot splitting strategies in the digital age.
AI-supported optimization
Artificial intelligence is revolutionizing lot allocation through predictive analytics and automated optimization. Machine learning algorithms analyze historical data and predict optimal allocation scenarios.
- Automated risk analysis and assessment
- Dynamic adjustment of allocation quotas
- Predictive maintenance for supplier relationships
Sustainability-oriented lot allocation
ESG criteria are becoming increasingly important in volume allocation. Companies are integrating sustainability assessments into their evaluation criteria and giving preference to environmentally friendly suppliers.
Agile distribution models
Flexible, quickly adaptable lot structures enable reactions to market changes. E-auctions support the dynamic redistribution of volumes based on current market conditions.
Conclusion
Lot splitting is an indispensable tool for resilient procurement strategies. The strategic distribution of volumes reduces supply risks, promotes competition and strengthens the negotiating position. However, successful implementation requires careful planning, continuous monitoring and a balance between risk minimization and cost efficiency. Modern AI technologies are increasingly supporting the optimization of allocation strategies.
FAQ
What is the difference between lot splitting and lot formation?
Lot formation refers to the structural grouping of procurement objects into tender lots, while lot splitting describes the strategic distribution of already defined volumes to different suppliers. Both processes complement each other in the procurement strategy.
When does lot splitting make sense?
Lot splitting is recommended for critical procurement categories with high volumes, strategic importance or supply risks. For A-goods and bottleneck products in particular, it reduces dependencies and strengthens the negotiating position with suppliers.
How do you determine the optimum allocation ratio?
The optimum ratio is based on risk analysis, supplier capacities and strategic objectives. Frequently, 60/40 or 70/30 splits with two suppliers prove successful, while 50/30/20 splits are optimal with three suppliers.
What costs arise from lot splitting?
Additional costs include increased administrative expenses, qualification costs for additional suppliers and potential losses of volume discounts. These should be weighed against the benefits of reduced supply risks and increased competition.
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