What a coincidence…this weekend, I’ve been spending a lot of time thinking about all of the recent supplier reduction announcements that companies have made over the last few months. Then, today, Supply Excellence posts a well-written piece on Kraft’s supplier reduction initiative.
While Supply Excellence points out the benefits of such a large-scale initiative – cutting Kraft’s supply base in half “would affect more than 30,000 companies” according to CNBC – one has to wonder if these types of moves are signs of good purchasing or years of neglect. After all, if half of the suppliers a company is using are unnecessary, why is the company using them in the first place?

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I really don’t know Kraft’s business, so I can’t comment on them directly. But I wonder: is a large supplier cut essentially saying that a company’s purchasing department has performed poorly in the past? That it has neglected its supply base management responsibilities for years?

Think of supplier reductions in terms of managing the clutter in your house. Are you a better “clutter manager” if you wait 10 years until your house is bursting at the seams before you decide to do a massive attack on the clutter or if you do annual “spring cleaning?”

Personally, I think that reviewing the size of the supply base is something that should be done annually or bi-annually. Despite being a smaller organization than the Krafts of the world, we do that here at Next Level Purchasing and have made some good decisions about which suppliers supply our various categories of purchases.

Actually, it would not surprise me if Kraft and other companies who have announced supplier reduction initiatives have indeed done a good job with their supply base management over the years. With these types of announcements, there may be some “executive scheming” that goes on behind the scenes to drive supplier reduction initiatives moreso than a great purchasing idea or actual inefficiency. So a supplier reduction initiative may indicate neither good purchasing nor years of neglect.

I’ll elaborate on this executive scheming in Part II tomorrow…