Procurement Service: Supplier Rationalisation

This document outlines supplier rationalisation; part of the Procurement service, its benefits and the process. To minimise risk to the business, strategic measures and a disciplined approach are used to identify the optimum number of suppliers needed to fulfil the company’s requirements.

The Process

This service has a number of effective steps that can be managed by the Procurement department. Broadly these steps are as follows:

• Categorisation: placing disparate but like suppliers into one common entity, this generates immediate budget saving opportunities backed by correct vendor data.

• Spend Analysis: determine the cost saving options available for different categories of spend, dependent upon the market difficulty and amount of spend.

• Scorecards and KPIs: measuring supplier performance against budget, service level agreement, statement of work, customer satisfaction, cost competiveness, resulting in continuous improvement.

If Working Links want access to increased special discounts, then the procurement department will advise on the route to be taken. These steps include:

Strategic measures: Supplier positioning is ranking vendors on how much we spend vs. assessing risk should a supplier fail to deliver.

Supplier relationship management: identify ways of working smarter with the suppliers we have, and how they can work with us to generate real gains and make a difference to the performance of our organisation.

Key Performance Indicators: combining different measurements of “quality” into one single measurement of overall performance by assigning “weighted” values to each key element (or KPI) performed by the supplier and calculating a weighted score that can be used to track the supplier’s performance.

Choosing new suppliers can be a time-consuming and risky process because you know so little about the other suppliers. This procurement service reduces both the time and the risk, because we'll only recommend suppliers that have passed company quality checks and have a track record with us.

Every saving generated can be put towards projects providing young people with an opportunity to gain new skills and sustainable employment.

Samantha Coombs June 2012