Supplier Base Reduction Individual Business Report - Essay Example

Organization may decide to reduce its supplier base due to the following problems or issues: First, increase in the price of the raw materials used by the organization. When the prices of raw materials increases the cost of manufacturing the final products of the organization also increases which hence increases the price of the final products. This increase in price of the products reduces the demand for the products, hence low revenue generated by the organization leading into low profit. Therefore, when the prices of raw materials used to manufacture the final product increases then the organization considers it wise to reduce the supplier base so as not to make more losses in the future.

Second, increase in business complexity as illustrated by Joseph (2010) is one of the problems that can make an organization reduces its supplier base. When the supplier base increases, the more complex it becomes. This makes it difficult for the firm to handle the large volume of supplies efficiently and effectively. Therefore, due to high complexity in supplier base the organization decides to reduce its supplier base so that it remains with a small consolidated supplier base that it can interact with to enhance the quality of its products.

The third factor is the continuous increase in the level of debt in the organization. As the number of suppliers in the organization increases, there is also increase in the amount of debt to these suppliers. These debts have to be kept very low in the organization through controlling them so that it doesn’t drive the organization to bankruptcy. Therefore, one of the issues that the organization looks at is the debt level of the suppliers when it wants to reduce the supplier base. The fourth problem or issue is the continuous changes in the market.

This is also a problem or issue that organizations look at when they want to reduce the supplier base. Changes in market such as a decrease in demand of the products may force