A Guest post by Megan Nichols
It’s safe to say everyone could use a bit of streamlining right now, not just regarding efficiency but also reduced responsibility. One of the best ways to do that within the supply chain is through vendor consolidation — what’s also referred to as vendor reduction.
Essentially, it’s a form of outsourcing for various services, enabling cost savings, boosted output and severely decreased administrative headaches. As a whole, it offers a wide variety of additional benefits to those willing to leap.
If you’re considering trying it, or you’re already planning to, here are some of the top vendor consolidation benefits you can expect to see:
1. Higher Cost Savings
Right out of the gate, one of the more obvious benefits is a much-deserved cost saving. By outsourcing certain processes or responsibilities, your team uses fewer resources and also invests less time. Instead, the work shifts to the vendor, ultimately achieving the same output and high-quality results for a lot less.
For the biggest impact, you’ll need to find a partner or vendor you can trust who also delivers quality work. Choosing the wrong vendor can be just as impactful to your bottom line, albeit negatively. It’s also worth mentioning that bringing on too many vendors, or ignoring consolidation to work with many partners, will create cost redundancies. It’s best to manage what you’re outsourcing, which means going for a more effective strategy as opposed to just offloading everything and anything.
2. Increased Productivity
For the most part, reducing the work that needs to be done internally means boosting productivity, if and when your vendors provide deliverables promptly. You expend fewer resources and man-hours, reduce tasks and speed up development.
Moreover, resources and labor that would have otherwise gone to what is now an outsourced task can be redistributed to other internalized projects. In other words, it’s an opportunity to speed up additional tasks and boost productivity across the board.
3. Greater Purchasing Power
With operations spread across multiple vendors, you have diluted your spending power. You’re likely making low-sum purchases for each vendor, reducing spending opportunities to work with better and more enhanced partners. To make it worse, you’re spending much more on services that could be handled by a single vendor.
This also decreases your value in the eyes of vendors, because you’re limiting what you could be investing in their services. This can even influence your relationship with individual vendors.
By finding a single partner, you suddenly gain much more buying power and have more leverage to request or negotiate for better contract terms. Many will even offer exclusive discounts or partner benefits for consolidating your orders.
4. Increased Visibility and Controls
Because you’re consolidating, or moving all of those responsibilities to a single vendor, a positive side effect is that you simultaneously enhance visibility. You also gain back some of the control you might have relinquished by spreading out those tasks across multiple partners.
When it’s time to map out your supply chain or check in due to a potential issue, it’s much harder to do so when there are numerous suppliers. Things become overly complicated, and sometimes you might run into a supplier that’s uncooperative or just unorganized. With one vendor you can trust — sometimes two — you’ve already built a cooperative relationship you can reap the benefits from, including total visibility across their operations and yours.
Revenue at “fully integrated” companies regularly outpaces non-integrated businesses by 20%. It’s primarily due to the impressive control they have over all their operations. Consolidating to gain better visibility and enhanced control puts your business closer to that green line.
5. Reliable Supplier Relationships
Speaking of improved relationships, that’s another major benefit of vendor consolidation. You build stronger, more productive and more trustworthy partnerships over the long term. A solid vendor consolidation approach is to find a partner you can create such a bond with. Sometimes, it’s less important to look at the immediate benefits and more crucial to consider the long-term impact.
With a long-term partner, you can better understand their operations, quality control systems and supply chain connections. For example, if you know where they are sourcing or acquiring their materials, you have a much better understanding of what’s going into your products and services.
Support and customer service are more likely to be positive when you’re working with a partner over the long term, too.
6. Reduced Training
Today’s workforce is up in the air right now. This is occurring not just because of the current pandemic, but also because of labor shortages, the introduction of new technologies and an ever-shifting economy. Yes, you always want to invest as much as possible in your new hires, but you don’t want to waste resources either.
Having vendors handle tasks or responsibilities instead of in-house teams means less responsibility on your workers and less training required. Vendors also maintain and update any necessary technologies, further reducing the strain on your workforce. This also reduces the peripheral training they will need overall.
7. More Administrative Reductions
The more suppliers, vendors and internal-to-external processes that exist, the more administrative work will be required. It’s a trade-off, but one that doesn’t necessarily need to happen. Through consolidation, those administrative tasks can be reduced, thus creating fewer headaches.
Usually, you manage everything from data entry, transaction records, communications and collaborative strategies. Instead, it’s all reeled in to include one or two vendors at maximum when you consolidate. This offers less of a headache and is also more effective and organized.
It’s Time to Consider a Vendor Consolidation Strategy
Just what is multi-vendor consolidation or vendor reduction? The answer is simple. It’s a streamlined and beneficial vendor consolidation framework that includes a single partner or vendor, as opposed to several. What would otherwise be handled by multiple vendors is instead consolidated under one banner.
The benefits include better cost savings, increased productivity, greater purchasing power, increased visibility, better relationships and reduced administrative responsibility. The advantages don’t stop there, either. That alone makes a strong case for either getting the ball rolling or seeking an appropriate vendor. What are you waiting for?
