Chapter 05 - FreeQuality

Report
Supply Base Reduction
Jordan Crespo
Marriott School of Management
What will be covered
1. What is supply base reduction?
2. Nuts and bolts
3. Brainstorming activity: Supplier recognition and
reduction
4. How supply base reduction works
5. Real world example
6. An exercise
7. Summary
8. Reading list
What is supply base reduction?
• Supply base reduction is the systematic
approach to reducing the number of
suppliers a company utilizes for a product
or service
Nuts and bolts
• Supply base reduction enables strategic
alliances through condensing supplier
variety to a select few who can meet
customer requirements
– Permits lower pricing
– Greater customer support
Nuts and bolts
• The alliances created can help create a
hybrid system of centralization and
decentralization
• Pressure from competitors who are earlyadopters of decentralization will be reduced
due to cost-savings available from supply
base reduction
Brainstorming activity
• Identify a common, frequently purchased
input that is managed through multiple
suppliers
– Raw materials
– Specialized input products
How supply base reduction works
Recognize
multiple,
similar items
Variety of
suppliers
utilized to
purchase item
Setup
guidelines to
filter most
effective
suppliers
Establish
strong
relationships
with those
suppliers
Utilize only
those
suppliers to
purchase
specific items,
reducing costs
Real world example: Unilever
• Background:
– Unilever was started in 1890 and today has over
400 brands that address health and wellbeing
– They developed an extremely decentralized
structure
– Purchased 30 types of vanilla for ice cream
(Fawcett, 2007)
• Other similar issues with different products
– “Like herding cats”
Real world example: Unilever
• Unilever began the “Path to Growth”
program in 1999
• It then began a new program called “One
Unilever” in 2004
An exercise
• Complete 7 step supplier selection process
1. Form a sourcing team
2. Develop sourcing strategy
3. Generate supplier portfolio
4. RFP process development
Exercise continued
5. Negotiate/select competitive supplier(s)
6. Operational integration
7. Benchmarking and improvement
Summary
• Supply base reduction is a company-wide
process that requires research and supplier input
• It generates cost savings when done efficiently
and correctly
• It strengthens relationships with strong suppliers
• Continuous measurements are necessary postreduction process to ensure precise actions were
taken and goals are being realized
Summary
• “without a competent supplier network, a
firm's ability to compete effectively in the
market can be hampered significantly.”
– Hahn, Watts, and Kim, 1990
Reading list
•
•
•
•
Ogden, Jeffrey, and Phillip Carter. "The supply base reduction process: an empirical
investigation." The International Journal of Logistics Management 19.1 (2008): 5-28.
Emerald. Web. 1 Nov. 2011.
Ogden, Jeff. "Practix." www.scm-blog.com. Caps Research, n.d. Web. 1 Nov. 2011.
<www.scm-blog.com/Supply%20base%20reduction
Fawcett, Stanley E., Lisa M. Ellram, and Jeffrey A. Ogden. "Supply Chain Rationalization
and Role Shifting." Supply Chain Management: from Vision to Implementation. Upper
Saddle River, NJ: Pearson Prentice Hall, 2007. 310-11. Print.
Hahn, C. K., Watts, C. A., and Kim, K. Y. 1990. The Supplier Development Program: A
Conceptual Model. Journal of Purchasing and Materials Management (Spring):2-7.

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