Sourcing

Supplier Rationalization

July 12, 2015 | Xeeva Team

There are many challenges for achieving supplier rationalization and standardization.

A typical tactic deployed by procurement organizations is trying to reduce the variety of similar items that the organization purchases. The reasons for this rationalization go beyond cost savings and can include:

  • Supplier diversity initiatives
  • Supply mitigation and management
  • Going green

Ultimately, standardizing is not as easy as it may first appear.

Take, for example, an organization with multiple manufacturing plants, each of which buys tens of thousands of protective gloves annually. If the specification of gloves for each of the plants is different, a buyer going to the marketplace looking for diverse sets of non-unified requirements will get a far different response from the vendor than the buyer looking for the same or similar requirements.

Standardizing is not as easy as it may first appear.

Gloves represent a relatively simple example of the challenges with rationalization. Try doing this same thing across complex items or for companies with plants overseas.

Gaining control over this standardization requires a clean corporate catalog, visibility across business units, front-end controls to reduce item proliferation, and a healthy dose of technology to manage it all.

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