What are the disadvantages of supply base rationalization?
He then goes on to lay out the five issues.
Supplier rationalization, also known as supply base reduction [SBR] is the process of shrinking the supply base by reducing the number of active suppliers. The primary agenda of supplier rationalization is to streamline the organization's spend to fewer suppliers and drive better value from those relationships.
What are two 2 formal approaches to supply base rationalization?
According to Monczka et al., (2009), there are many methods that are commonly used to rationalize the supply base. These methods include: twenty/ eighty rule, “improve or else” approach, triage approach, and the competency staircase approach.
Multiple supply sourcing may benefit dependency, flexibility and capacity, but it can complicate supplier relationships and require greater resources to manage them. As supplier numbers grow, the price tag often goes up and the following drawbacks can occur: information sharing may become more complex.
What are the advantages of supply base rationalization?
Benefits of supplier rationalization Supplier rationalization can lead to better buying costs and terms, lower overhead costs, and cost savings in shipping and handling. It also contributes to better supply quality and reliability, stronger contractual agreements, and more integration with suppliers.
Weakens Procurement's Negotiating Position In addition to issues with poor internal user adoption and lost savings opportunities, supply base rationalization can also backfire with suppliers themselves by reducing a business' negotiating leverage.14-Aug-2018
What would you consider the most important benefits related to supply base reduction?
Reduced Purchasing Costs As a company reduces its supplier base, purchasing power increases. By allocating more resources to fewer suppliers, companies can receive better prices for a product.01-Jun-2017
4 steps for reducing your supplier base
What is a characteristic of supply base reduction volume consolidation?
Supply base reduction (volume consolidation) Has potential benefits for suppliers as well as for buyers. Value management: Includes value engineering, reduced complexity, and early supplier involvement to reduce TCO.
Supplier consolidation is the process of reducing suppliers. It is a supply chain management strategy that can be implemented within any industry and aims to reduce the quantity of vendors. For your business, that can mean reducing suppliers down to a few or one single partner depending on organizational needs.
What is supplier negotiation?
Negotiating is the process that procurement professionals go through to create favourable terms as part of a new supplier contract. This can involve negotiating different terms with an existing supplier when a contract is renewed, or discussing terms from scratch with a brand new vendor.12-Nov-2019
Supplier development is working collaboratively with critical, strategic and high-potential suppliers to improve their capabilities and competitiveness in the areas of cost, quality, time and technology for the mutual benefit of both the customer and the supplier.11-Apr-2022
What is supplier base?
A supply base is defined as the portion of a supply network that is actively managed by a buying company. The buying company, referred to as the focal company, manages the suppliers in the supply base through contracts and purchasing of parts, materials, and services.
However, one major downside of this strategy is that it can ensure high costs to the company if the partners are changed. This is because companies are known to be loyal to their suppliers as they are important and integrated into their complete supply chain operations for maximized efficiency and effectiveness.
What are two advantages of dual sourcing?
Pros of Dual Sourcing
Supply Chain Risks Continue Mounting Most of the risks that could disrupt your operations fall into four broad categories: economic, environmental, political and ethical.27-May-2021
What are the types of supplier risk?
In Supplier Risk Management, there are numerous risks that tend to come up - delays from suppliers, production disturbances, natural disasters, theft, shortages and cybersecurity, organizational and operational issues.
Top Supply Chain Metrics
What are the advantages and disadvantages of supply chain management?
Advantages and Disadvantages of Supply chain management
Mismanaged Implementation – Changing a supply chain management system takes financial investment, time, and human resources. If not implemented properly, there will be wasted labor, service redundancy, and missed deadlines that result in significant costs.01-May-2021
What are the advantages of supply chain management?
Important benefits of supply chain management
What are the disadvantages of supply base rationalization?