Supplier Rationalization Definition

Supplier rationalization is the process of reducing the number of suppliers that a company uses to streamline operations and improve efficiency. The goal is to work with fewer, more strategic suppliers that can provide better quality goods or services at a lower cost. This can be accomplished through supplier consolidation, where multiple suppliers are combined into one, or by eliminating low-performing suppliers.

There are several benefits of supplier rationalization, including improved negotiating power with fewer suppliers, reduced costs from economies of scale, and improved quality from working with more strategic partners. Additionally, supplier rationalization can help simplify a company’s supply chain and make it easier to manage.

There are some risks associated with supplier rationalization as well, such as increased dependency on fewer suppliers and disruptions to the supply chain if a key supplier is unable to meet demand. Additionally, it can be difficult to identify which suppliers to keep and which to eliminate. Supplier rationalization should only be undertaken after careful consideration and planning to ensure that it will ultimately benefit the company.