Supply Base Reduction Jordan Crespo Marriott School of Management

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Supply Base ReductionJordan CrespoMarriott
School of Management
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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

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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

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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

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Nuts and bolts

• The alliances created can help create a hybrid
  system of centralization and decentralization
• Pressure from competitors who are early-adopters
  of decentralization will be reduced due to
  cost-savings available from supply base reduction

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Brainstorming activity

• Identify a common, frequently purchased input
  that is managed through multiple suppliers
• Raw materials
• Specialized input products

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How supply base reduction works
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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

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Real world example Unilever

• Unilever began the Path to Growth program in
  1999
• It then began a new program called One Unilever
  in 2004

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An exercise

• Complete 7 step supplier selection process
• Form a sourcing team
• Develop sourcing strategy
• Generate supplier portfolio
• RFP process development

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Exercise continued

• 5. Negotiate/select competitive supplier(s)
• 6. Operational integration
• 7. Benchmarking and improvement

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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
  post-reduction process to ensure precise actions
  were taken and goals are being realized

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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

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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.
  ltwww.scm-blog.com/Supply20base20reduction
• 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.