Supplier Rationalization: Alive and Well Across the Pond
Might the Brits be getting a bit too giddy over the benefits of supplier rationalization? In the above-linked post to E-Sourcing Forum, David Bush and his associates tipped me off to an article in Supply Management that suggests that over 75% of UK procurement organizations are looking to rationalize their supply base. Granted, the sample size is small (100 companies), but it's at least a directional indicator, if anything.
Even "green" is creeping into the benefits bucket for such initiatives. According to one UK-based practitioner quoted in the article, "The benefits of having fewer suppliers are less administration time, less logistics time, less carbon footprint, less reactive buying and becoming a bigger fish in a few suppliers' ponds rather than a small fish in a large organisation's ocean." I never thought about the sustainability angle as it relates to supplier rationalization before. But it makes sense. Fewer suppliers means fewer resources required to manage them (which means less paper and fewer flights or other polluting visits to suppliers). But at the same time, supplier rationalization efforts can also increase supply risk as well by limiting a company's options and back-up plans if a disruption, quality issue or supplier bankruptcy occurs.
- Jason Busch
Even "green" is creeping into the benefits bucket for such initiatives. According to one UK-based practitioner quoted in the article, "The benefits of having fewer suppliers are less administration time, less logistics time, less carbon footprint, less reactive buying and becoming a bigger fish in a few suppliers' ponds rather than a small fish in a large organisation's ocean." I never thought about the sustainability angle as it relates to supplier rationalization before. But it makes sense. Fewer suppliers means fewer resources required to manage them (which means less paper and fewer flights or other polluting visits to suppliers). But at the same time, supplier rationalization efforts can also increase supply risk as well by limiting a company's options and back-up plans if a disruption, quality issue or supplier bankruptcy occurs.
- Jason Busch
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"Supplier Rationalization" - is a term easily said than done. I think that the number of factors that are going into for making a decision in this direction is much more complex. The subjective parameters involved in this process makes this exercise in organizations an ongoing effort and the time periods run for a "Supplier Rationalization" project into several months, depending upon the type of industry and the risk factors. Above all this, I also feel that the human dynamics involved in the relationships at various levels say "Buyers-Suppliers at execution level" (Critical), "CPO from Buyer Org - Supplier end COO", "Buyer Org. financial controllers - Supplier end Financial negotiators" etc... is much high. These Human Resources perspective and the dynamics involved between the stake holders can dictate the success or failure of the Supplier Rationalization projects.
# Posted By Senthil
| 3/6/08 8:45 PM
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