12
Supply base optimization
The natural result of all this ‘spend mapping’ and ‘supplier positioning’ is the customers’ desire to ‘manage’ their suppliers, or supply base. In broad terms, supply base optimization answers two questions: (1) Which suppliers will best help us? (2) How must we help them? This might involve reducing numbers, finding new suppliers or resurrecting sleeping ones. It might even involve actively developing the capabilities of some suppliers. The aims are varied: improved efficiency through lower transaction costs, greater leverage, greater control and improved value received. But, whatever the motivation, this is a trend that will affect all suppliers. This chapter will look at two broad directions: (1) reducing supplier numbers; (2) developing suppliers’ capabilities.
REDUCING SUPPLIER NUMBERS Supplier rationalization is a phrase to strike terror into the hearts of most suppliers. Of course, if you are on the list of survivors then it could be good news, but that hardly makes you sleep easy at night while the process is under way. Done badly, such activities can create havoc for both supplier and customer. Confidence can be blown and performance can suffer. A nervous supplier is rarely the best supplier. Doing it ‘badly’ might mean any number 134