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Supplier Base Management: A New Competitive Edge

Many companies take a purely tactical approach with their suppliers. Yet in doing so, they miss out on the benefits that come from strategically managing the supply base—an activity that incorporates current, potential, and even past suppliers. For guidance on how to get the process known as Supplier Base Management underway, there is no more instructive place to look than professional baseball.

By ·

It can be said that the 1980s and the early part of the 1990s were the period of quality.  The late 1990s and the early part of the first decade of the 21st century may be considered the era of lean.  Now, as we enter into the second decade of the 21st century, we may fully be in the age of the supply chain.  Supply chain management expands the reach of the firm beyond its immediate grasp to those places where competitive advantage is derived—in particular, the supplier base. Essentially, it is no longer firm competing against firm—Boeing against Airbus, Target against Walmart; rather, it is supply chain vs. supply chain.

As we shift the competitive focus from the firm to the supply chain, we must recognize that, like physical chains, no supply chain is stronger than its weakest link.  However, when the weakest link resides beyond the boundary of the supply chain organizer (firm), significant problems can and do occur. This is particularly true with regard to the supplier base. In fact, one recent study found that 28 percent of the firms surveyed identified supplier failure and continuity of supply as their primary supply chain risk factor.

This raises an interesting issue: How does a firm ensure that it has the “right” set of suppliers in its supply chain?  Addressing this cannot be left to chance. It is far too important—as any company that has suffered a supplier-related disruption can attest. The supplier base must be carefully and continuously managed. The supplier base must be managed strategically, not tactically; it must be managed with the perspective that the supplier base, like the business environment in which it operates, is dynamic and ever changing.  That is, existing suppliers often leave (as a result of bankruptcy, acquisition, or changes in the buying company’s strategic direction) and new, attractive suppliers enter.  Finally, the firm should recognize that managing a supplier base does not always mean supplier reductions.  There may be strategic reasons why the base may need to be larger, rather than smaller…

A new approach is emerging called supplier base management (SBM) that effectively deals with these challenges. Supplier base management is a systematic, holistic, strategic approach to planning, developing, and managing the supplier base. This article introduces this concept and explores its implications within a supply chain context. In doing so, we draw an interesting analogy between SBM and professional baseball.

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Download Article PDF

It can be said that the 1980s and the early part of the 1990s were the period of quality.  The late 1990s and the early part of the first decade of the 21st century may be considered the era of lean.  Now, as we enter into the second decade of the 21st century, we may fully be in the age of the supply chain.  Supply chain management expands the reach of the firm beyond its immediate grasp to those places where competitive advantage is derived—in particular, the supplier base. Essentially, it is no longer firm competing against firm—Boeing against Airbus, Target against Walmart; rather, it is supply chain vs. supply chain.

As we shift the competitive focus from the firm to the supply chain, we must recognize that, like physical chains, no supply chain is stronger than its weakest link.  However, when the weakest link resides beyond the boundary of the supply chain organizer (firm), significant problems can and do occur. This is particularly true with regard to the supplier base. In fact, one recent study found that 28 percent of the firms surveyed identified supplier failure and continuity of supply as their primary supply chain risk factor.

This raises an interesting issue: How does a firm ensure that it has the “right” set of suppliers in its supply chain?  Addressing this cannot be left to chance. It is far too important—as any company that has suffered a supplier-related disruption can attest. The supplier base must be carefully and continuously managed. The supplier base must be managed strategically, not tactically; it must be managed with the perspective that the supplier base, like the business environment in which it operates, is dynamic and ever changing.  That is, existing suppliers often leave (as a result of bankruptcy, acquisition, or changes in the buying company’s strategic direction) and new, attractive suppliers enter.  Finally, the firm should recognize that managing a supplier base does not always mean supplier reductions.  There may be strategic reasons why the base may need to be larger, rather than smaller…

A new approach is emerging called supplier base management (SBM) that effectively deals with these challenges. Supplier base management is a systematic, holistic, strategic approach to planning, developing, and managing the supplier base. This article introduces this concept and explores its implications within a supply chain context. In doing so, we draw an interesting analogy between SBM and professional baseball.

SUBSCRIBERS: Click here to download PDF of the full article.

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Third Party Risk: Too Close for Comfort
You’ve got a handle on many of the potential supply chain "disrupters" that can paralyze your business. But the real risk is embedded in areas you may have overlooked.
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From the December 2017
This is a comprehensive guide to services, products and educational opportunities targeted specifically to supply chain professionals. As with years past, we’re also featuring several articles we trust will offer food for thought in your supply chain throughout the coming year.
Transportation Trends: The last mile, history repeating
Economic Outlook: A Complex and Uneven Scenario for Global Supply Chains
View More From this Issue
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