Question

suppliers’ issue.. Why would it be beneficial to reduce the number of suppliers and what methods could be used to achieve that economically?

Answer 1

Answer 1. Benefits of suppliers reduction-

There are a lot of risks as well as benefits include in suppliers reduction process. This process is under supply chain management strategy. The purpose of this process is to reduce supply chain cost and improve the efficiency. The benefits of suppliers reduction are-

1. The reduction in cost- The purchasing power increases as a company reduces its suppliers. By allocating more resources to fewer suppliers, companies can receive more profit from the product.

2. The reduction in risk- Suppliers reduction also reduces the chance of risk. The company can better focus on securing all applicable risk throughout the supply chain.

3. Easy to handle- If the company deal with fewer suppliers, there is less administration and paperwork to handle. Also the company get more time to focus on other areas of the business.

4. More financial visibility- If the company reduces the supplier, it will have better visibility for their financial proposals and deals. In case of any problem, it will be spotted very easily.

5. Removal of wastage- Having lots of different suppliers billing, increase the unnessary burden on the company. Reducing the suppliers means the company will be able to keep better track of the payments and be able to remove the wastage.

Answer 2. Methods of suppliers reduction-

We can understand the reduction method of the suppliers by these steps-

a) Prepare a list of those suppliers whom the company wants to eliminate.

b) This list will be prepared on the basis of the suppliers' quality records and their performance.

c) These suppliers are analyzed to identify their ability to create the value for the company.  

d) Analyze their quality, performance and value in detail.

e) Prepare the final list of eliminated suppliers .