Preface

Welcome to the first of 2 blogs on how to consolidate your vendors. Reduce your level of costs and risks placed on contractual agreements, as well as across the whole of the vendor relationship lifecycle.

Vendor Consolidation is the idea of selecting and reducing your vendor count in order to enable specific and targeted focus on those vendors which have the most effective contribution to the strategic alignment of your business. This is all dependent on their competency across the market, selecting the best and most suited propositions that will help to continue improvement across your organisation.

In today’s age, it can be a strain to find cost-saving initiatives, especially across the manufacturing industry for example. But, as costs continue to increase, especially with the uncertainty and speculation of the UK’s Brexit campaign, it becomes a lot harder for suppliers to reduce their costs whilst making financial gains at the same time. But with vendor consolidation, you can enhance your strategic outlook across the supply chain by reducing contractual costs, reducing process costs, reducing risk and improving upon supplier relationships.

In this first of two blogs, I’ll be talking about how vendor consolidation can help your business reduce both contractual costs and process costs, therefore saving money as well as adding value across your business and their strategies.

Vendor Consolidation Brings:

1. A Reduction in Contractual Costs

With vendor consolidation, a company has the aim to reduce its vendor portfolio in an attempt to improve the efficiency of ownership the SRM function takes upon a group of vendors, as well as allocate more of its resources to a smaller group of vendors. By doing so, the SRM function can increase their levels of stocks or services, and potentially gain better value for money, as they look to offload more reliability to one (or a few) sole vendor. Relying on a large group of vendors for the same reason can often be more time-consuming and result in more contractual costs, therefore consolidation will increase value in terms of time consumption and the costs of contracting with those vendors consolidated. Especially for manufacturing suppliers, the overall freight, handling and other related delivery fees will reduce in cost also.

2. An Increase in Vendor Process Streamlining

Strategically focusing on consolidating your vendors will also mean that there are lower transaction costs. With fewer vendors to take responsibility for, the costs involved in setting up a supplier within internal systems, completing transactions and managing the relationship significantly decreases. There is much more time retained which has a positive effect in finding more opportunities to focus on those vendors that matter most to your strategic intentions. This overall doesn’t just pull a huge weight off the shoulders of the SRM function, but also allows for better quality and insight with the vendors that are of most importance. This means the level of attention pours into the consolidated vendors, making management of the portfolio easier and therefore produce better results in terms of attaining high-quality performance and mitigating risk at a faster rate.

We hope this first blog was beneficial in helping you find out more about the idea of a vendor consolidation strategy being used to improve the stability of your vendor relations.