On the surface, it might seem like a tug of war. First came supply base rationalization and the mandate to achieve supply chain efficiencies by decreasing the number of suppliers. Now e-procurement and online marketplaces come along, and you are supposed to leverage the Internet's search capabilities and give your company access to an expanding roster of potential new suppliers.
Reduce and expand at the same time? Next thing you know, you'll be leaping tall buildings, too.
Actually, purchasing and supply management professionals at companies entering the virtual marketplace as buyers are finding that e-procurement can support supply base rationalization. As long as their focus remains on rationalization as a strategy and on e-procurement as a tool to facilitate that strategy, companies achieve a smaller supplier base, reduced maverick spending and long-term relationships with strategic suppliers.
Supply base rationalization has been the mantra in purchasing and supply management since the mid-1990s. The goals of rationalization include reducing administrative costs associated with numerous suppliers, streamlining purchasing processes and improving control over inventory.
Rationalization strategies of recent years have met with some degree of success, according to a 1999 report by KPMG Consulting, titled,