The objective in supply base rationalization and consolidation is to minimize the number of suppliers while satisfying all the quality and cost objectives of the sourcing policy. Fortunately, those goals – minimizing the number of suppliers, improving supply quality, and reducing total acquisition cost – go hand-in-hand. Raising quality standards automatically disqualifies many suppliers. Increasing the volumes contracted with the smaller supplier base should also yield unit purchase price reductions. In addition, long and short-term logistics initiatives aimed at enhancing customer service and reducing total logistics cost are much easier to implement with a few, highly integrated, and highly capable suppliers than with a large mix of loosely integrated, inconsistently capable suppliers.
Supply base rationalization and consolidation should be an on-going, cross-functional practice supported by updated supplier performance metrics provide by the logistics information system.