Supplier rationalization, also known as supply base reduction [SBR] is the process of shrinking the supply base by reducing the number of active suppliers. The primary agenda of supplier rationalization is to streamline the organization's spend to fewer suppliers and drive better value from those relationships.

What is a supply base?

A supply base is defined as the portion of a supply network that is actively managed by a buying company. The buying company, referred to as the focal company, manages the suppliers in the supply base through contracts and purchasing of parts, materials, and services.

What is the outcome of supply base rationalization?

Supplier rationalization can lead to better buying costs and terms, lower overhead costs, and cost savings in shipping and handling. It also contributes to better supply quality and reliability, stronger contractual agreements, and more integration with suppliers.