The Procurement Glossary » Supplier Rationalization
Supplier Rationalization
Suppliers & Vendors
Definition
The structured review and reduction of a supplier base to eliminate redundant, dormant or underperforming vendors.
Explanation
Rationalization analyses spend and performance to decide which suppliers to keep, consolidate or drop. It reduces overhead and risk and is often the first step of a tail-spend or category improvement programme.
Example
Rationalization deactivates 200 vendors that each received under RM1,000 last year.
Related terms
- Supplier Consolidation — Reducing the number of suppliers in a category by concentrating spend with fewer, better-managed vendors.
- Supplier Base — The full set of suppliers an organisation actively buys from.
- Tail Spend — The large number of low-value transactions and suppliers that together make up a small share of total spend but a big share of effort.
- Duplicate Vendor — More than one vendor-master record representing the same real supplier, caused by data-entry variation.
Frequently Asked Questions
What is Supplier Rationalization?
The structured review and reduction of a supplier base to eliminate redundant, dormant or underperforming vendors. Rationalization analyses spend and performance to decide which suppliers to keep, consolidate or drop. It reduces overhead and risk and is often the first step of a tail-spend or category improvement programme.
Can you give an example of Supplier Rationalization?
Rationalization deactivates 200 vendors that each received under RM1,000 last year.
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