Chemical procurement is getting increasingly sophisticated with the availability of multiple sources of supply dispersed across a wide geographic area. Also, each supplier’s offerings differ in terms of material, quality, packaging, and pricing. An effective way to simplify such a complex supply chain to ensure smooth flow of operations and generate cost savings is through supplier rationalization. By mapping the supply base to business needs from the perspective of risk, process cost, and sustainability, companies can use supplier rationalization to limit the number of suppliers to an optimal level.
Here’s a look at how chemical supply chain rationalization can help businesses:
Manageable Number of Suppliers
A number of processes are outsourced in the chemical industry, add to that a large number of suppliers, and it becomes a hassle to manage the supply chain. The supply chain rationalization process breaks down suppliers into different tiers in order of their importance to the buyer. By eliminating suppliers that do not provide strategic importance, valuable management and administrative
time could be freed up. Limiting the number of suppliers also facilitates information sharing, accurate scheduling, and improved delivery performance.
Suppliers, Fight for Your Business
Complacency could lurk within the supplier’s organization once they become familiar with the purchasing company. Supply chain rationalization eliminates non-strategic and non-performing suppliers, so suppliers are always competing to provide the best value to win your business. This healthy competition also drives innovation and leads to improved service and efficiency.
Getting Suppliers Closer to the Business
Businesses are on the lookout to bring suppliers closer to them to meet the objective of cost control, risk reduction, and sustainability measures. Sourcing locally can help cut down the lengthy procurement process and speed up the production. The term “closer to the business” refers not only to the location but also their relationship. With improved spend visibility, businesses can identify their supplier’s product portfolio and look out for other items that can be bought from the trusted supplier to consolidate the purchase.
Supply chain rationalization is not all about cutting down on the number of suppliers. It’s about optimally managing the number of suppliers to achieve operational excellence. A manageable number of suppliers improves the possibilities of identifying process inefficiencies, leading to simplified procurement reports.
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