The truth is that most often people think of Supplier Rationalization or supply base rationalization as cutting the number of suppliers; but in reality, one needs to look beyond, to assess the supply base rationalization beyond just the count, based on multiple factors.

Supplier consolidation can help build very valuable relationships with vendors, while also providing buyers with greater leverage for negotiations. An effective supplier consolidation program helps reduce costs and increase procurement efficiency across the supply chain. Any industry can implement supplier consolidation, which reduces the number of vendors by consolidating suppliers. Supplier consolidation can be done for various reasons, but the most common are to decrease costs and to enhance efficiency.

Benefits of Supplier Rationalization

  1. Reduced transactional overheads
  2. Better buying costs and terms
  3. Develop best in class suppliers, for each category
  4. Improve supply quality and reliability
  5. Reduce shipping and handling costs
  6. Implement stronger contractual agreements
  7. Lower inventory carrying costs
  8. Better integration with suppliers

The major steps in our approach on supply base rationalization:

  • Initial Phase
    • Supplier and category wise spend data analysis
    • Categorize suppliers based on various parameters
    • Identify common suppliers across business units and locations
    • Supplier performance and pricing analysis
    • Identify opportunities for material standardization
    • Define supplier/vendor rationalization approach
  • Framework Development
    • Define supplier elimination criteria
    • Identify critical suppliers
    • Review contracts with key suppliers
    • Identify economies of scale from consolidation
    • Develop a transition roadmap
  • Implementation
    • Establish strategy for vendor consolidation
    • Identify and mitigate transition risks
    • Confirm buy-in from all internal stakeholders
    • Initiate transition and consolidation
    • Implement an ongoing vendor governance model
Talk to our Supplier Rationalization expert today!