Supply base rationalisation

These advantages, however, need to be set against the problems that can be associated with the introduction of commitment and tmst. 

Examples of potential disadvantages of partnerships include the following  

Consider the reasons why a company would wish to enter into a partnership with a customer or supplier. List the advantages and disadvantages you can think of. 

Key issue What are the drivers for reducing the numbers of direct suppliers  

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Supply base rationalisation dealing with a smaller number of suppliers to enable high-intensity relationships to develop. 

Supply base rationalisation seeks to reduce the suppliers with which an organisation deals directly to a smaller number of strategic suppliers. Rationalisation involves re-tiering the supply chain so that other suppliers are placed under a lead supplier, or tier 1 supplier. 

Despite the benefits of supplier rationalisation and focused factories, risk management does imply there is real rationale for lining up alternative suppliers in different locations and for manufacturers to develop a thorough understanding of their suppliers capabilities and vulnerabilities. Companies are responding in two ways consider alternative and back-up sources and proactively audit the supply base for financial and operational sustainability in these tough times. Hewlett-Packard, for example, has secondary suppliers for all critical components as part of its continuity plan. 

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