Objective 3: Develop Supply Base Management

One of the most important objectives of the purchasing function is the selection, development, and maintenance of suppliers, a process that is sometimes described as supply base management. Purchasing must keep abreast of current conditions in supply markets to ensure that purchasing (1) selects suppliers that are competitive, (2) identifies new suppliers that have the potential for excellent performance and develops closer relationships with these suppliers, (3) improves existing suppliers, and (4) develops new suppliers that are not competitive with current suppliers. In so doing, purchasing can select and manage a supply base capable of providing performance advantages in product cost, quality, technology, delivery, and new-product development.

Supply base management requires that purchasing pursue better relationships with external suppliers and develop reliable, high-quality supply sources. This objective also requires that purchasing work directly with suppliers to improve existing capabilities and develop new capabilities. In some cases, supply managers may need to challenge internal customers who want to add new but unqualified suppliers to the supply base. A good part of this text focuses on how purchasing can effectively meet these objectives.