What is supply base rationalization?
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.
1.1.1 Supplier Base Rationalization These methods include: twenty/ eighty rule, “improve or else” approach, triage approach, and the competency staircase approach. Rationalization of the supplier base also requires an organization to categorize its spend and identify current and potential suppliers for each category.
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.
He then goes on to lay out the five issues.
How do you optimize your supply base?
6 steps for successful supply base optimization
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
Supply base reduction [SBR] is the process of deliberately reducing the number of active suppliers in the supply base. The motivation is to consolidate the organisation's spend to fewer suppliers and to leverage better value from those relationships.11-Aug-2022
What is supplier consolidation?
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.
The process
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 are the advantages and disadvantages of multiple sourcing?
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.
Tail spend is generally defined as the amount of money that an organization spends on purchases that make up approximately 80% of transactions but only 20% of total spend volume.03-Jul-2019
What is proactive procurement?
Proactive procurement means knowing what your organization will buy and planning an appropriate procurement strategy well before the first purchase order needs to be placed.22-Apr-2021
4 ways to optimize your supply chain to increase quality and reduce risk
How do you optimize inventory?
Inventory optimization techniques
Supply-chain optimization (SCO) aims to ensure the optimal operation of a manufacturing and distribution supply chain. This includes the optimal placement of inventory within the supply chain, minimizing operating costs including manufacturing costs, transportation costs, and distribution costs.
What are the 4 types of risks in the supply chain?
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
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.
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.
What is supply base rationalization?