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Supplier rationalisation Essay

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This structure helps Sainsburys meet its objectives because it motivates and develops employees as well as giving then a sense of purpose and security. It also encourages the company to be more flexible which helps in the ever-changing business world. It also helps to focus on tasks necessary for business success. Supply Before supply for Sainsbury’s was a real problem. Supply and demand is a very demanding idea. What the customer demand must be supplied if a profit is to be made. Locating suppliers and contacting them is usually not a problem as there is a market of suppliers to choose from. However, dealing with your supplier can be a huge amount of trouble.

As a supermarket you must respond quickly, before Sainsbury’s had to use old systems of dealer ship which would be to order by mail, by phone or even fact to face. These are all awfully slow. For example, a new product is in demand and you haven’t got any in stock. What do you do? First you must find a supplier, again not a problem but very time consuming. Agree on a price per amount of stock and begin transaction. This can take weeks if not months to finalise sometimes. Overall a bad response time.

So, Sainsbury’s decided to put a more effective solution into action. Once again they utilised ICT to do the hard work for them. By setting up a nation wide network of computer systems devoted to only to the business of demand and supply a new channel of dealer ship was open to Sainsbury’s. They could now search huge databases of suppliers by for example, price per stock or even distance from store. Once the supplier is found one time deals or even long term propositions could be set-up with direct accounts in hours.

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Supplier rationalisation

Many organisations, as they grow, take on more and more suppliers. Any organisation that does a thorough check on the number of, and nature of, its suppliers will find that there has been little attempt to rationalise. Taking a critical look at suppliers pays dividends. Maintaining large numbers of suppliers for a wide variety of goods and components prevents strategic use of the supplier relationship. Working with a small number of suppliers over a long period of time allows a partnership of supply to be developed in which suppliers, with a degree of security in the relationship, can be persuaded to focus attention on aspects of supply other than price – on quality and delivery, for example.

Organisations, for whom buying wisely is important, tend to use professional and experienced purchasing officers and buyers to manage sources of supply. Another reason for limiting the number of suppliers is that there is a natural limit to the number of supplying organisations that such professionals can effectively manage. The organisation can work with the limited number of key strategic suppliers to change the methods of supply. For example, it is much easier to establish effective and compatible electronic communication processes (email and electronic document interchange) with a small number of suppliers. Of course care must be taken to avoid a “cosy” relationship in which suppliers become complacent. Confident organisations, however, know that if internal complacency can be avoided through good management and effective performance monitoring – then so it can with external suppliers.

Reducing the number of suppliers reduces the administrative burden that is associated with maintaining records of, and the history of the relationship with, suppliers. Reducing wasteful and inefficient activity is a profitable source of improved productivity and the momentum of this review should be maintained to examine the set of detailed processes and activities relating to the supply chain.


An obvious consideration is the outsourcing of elements of supply and/or distribution. Distribution, in particular, has been a particular area in which outsourcing has proved popular. The costs associated with managing (relatively) small warehousing operations, transport fleets, and maintenance workshops, etc. can be reduced by taking advantage of the economies of scale of a specialist supplier. In terms of the supply end of the chain, moves towards just-in-time manufacturing – built around key supplier partnerships – can significantly reduce component stocks and stockholding costs.


Culture at Sainsburys is fairly relaxed at lower levels from people working on the shop floor to managers who control them and employ person culture where staff are genuinely supportive of each others personal developments and progress this is also a positive culture where managers and workers alike are cooperative and supportive of each others contributions and efforts and consider many issues as opportunities rather than threats. Employees lower down the hierarchy tend to be relaxed and supportive of each other’s problems and needs, where there is no competition as people tend to be at the same level or there abouts.

As you move up the hierarchy to managers there is still a fairly relaxed view even though they have a lot more to deal with and more stress put upon them. This changes drastically as you look further up the hierarchy and move towards store managers where there is more competition and more scope for promotion as lower down the hierarchy people tend to be working there as a part time job while they are studying and as you move up the hierarchy people tend to be there full time and is a job for life, so they want to make the most out of it. Positions tend to be a lot more defined and people know their position on the hierarchy and this is normally obvious as power becomes more obvious.

Sainsburys Production Process Quality assurance/Control System

Sainsburys success has been based on providing good quality food. Even their catchphrase shows this “making life taste better”. So obviously they must go to great lengths to ensure that their food is of a good quality. They have introduced such schemes as ‘fair-trade products’ and ‘Sainsburys 1st Class range’. This is effectively sealing the approval of Sainsburys on the products that bear these seals. Of course they also work under the system of which you can return your products within 18 days if you are not completely satisfied. Sainsburys are taking big measures to attempt to modernise Stock Control methods. Sainsburys have recently brought in a system using a smart label technique. This technique is so advanced that soon they will be able to follow every individual item through the distribution chain, completely automatically.

This means that stock control becomes an exact science with every item individually recognised and with no possibility of operatives entering inaccurate information. This will pull out massive costs from the distribution process and improve efficiency by an order of magnitude. It also means that if substandard or contaminated product enters the supply chain, every single item can be traced instantly as soon as the problem becomes apparent.

‘Smart labels’ are based on radio frequency identification (RFID) technology. Each contains a tiny silicon chip and an antenna, so can send and receive information to and from base stations or ‘portals’ located at key points throughout the supply chain. The portals forward the information to a central computer controlling the whole distribution process, which is thus automatically updated as items progress through the chain. With this ‘perfect’ information available to the logistics managers from the smart labels, no stock need ever go astray nor exceed its sell by date. “This is a level of control that is simply impossible to achieve with bar codes, manual data entry or any other system. And even better is the fact that it is totally automatic, reducing our labour input considerably.”

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