The truth is that most often people think of supplier rationalization as cutting the number of suppliers; but in reality, one needs to look beyond, to assess the supplier base beyond just the count, based on multiple factors.
Supplier rationalization or consolidation can help build very valuable relationships with vendors, while also providing buyers with greater leverage for negotiations.
Some of the advantages of having a good supplier rationalization program are:
- Reduced transactional overheads
- Better buying costs and terms
- Develop best in class suppliers, for each category
- Improve supply quality and reliability
- Reduce shipping and handling costs
- Implement stronger contractual agreements
- Lower inventory carrying costs
- Better integration with suppliers