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Supplier Rationalization

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.

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