The supply base management process is a comprehensive system of managing the suppliers of a particular business. It involves a 360-degree approach that includes evaluating existing suppliers, eliminating poor performers, and adding new suppliers.
This process aims to improve the cost-effectiveness of the procurement process, ensure better supplier relationship management and also generate sources for new materials/services that are needed.
The process begins first by categorizing the existing vendors, followed by audits and evaluations for each category. The top performers are retained, and the lowest have their contracts terminated. The next step is to find alternatives to those suppliers that have been eliminated. Market surveys and bid requests will have to be used to find replacements.
Once a complete set of suppliers is identified, supplier rationalization begins. This process reduces the total number of suppliers while increasing the efficiency and cost-saving impact of the entire supply chain.
If the company wants to introduce some new products and needs more suppliers, that too has to be organized through pre-qualification assessments.
The supply base management process improves vendor relations because companies can identify and prioritize their critical suppliers. Subsequently, minor suppliers can gradually be eliminated or dealt with at a different priority level.
Over time, this supply base management process will build up a long record in the company database, which it can use for quick changes and references anytime there is an issue related to its supply chain. The more detailed the management process, the better will be its long-term benefits to the company.