One of the most pressing issues for most businesses today is the challenges faced while managing their supplier base, which often leads to an unnecessary increase in time, workload, and effort for ensuring the maintenance of these relationships in order to extract the most cost-efficient value and the best possible service.
Taking into consideration the fact that it can be really costly, as well as distracting, to develop new supplier partnerships, which in turn take away time and attention from the core requirements of a business. The consolidation of supplier base is an objective well worth a business’s while, as it can provide an increment in service/quality levels and a reduction in procurement/operation expenses as well as soft costs, at the same time.
To help you make a smart assessment regarding vendor consolidation, here are five evaluations that you should make before consolidating your vendor base:
- Product Capability: It is important that proper thorough research is conducted for the suppliers, keeping in mind that it is always advisable to obtain the widest possible product/service from a single point of origin. Hence, it is also necessary that the chosen supplier has knowledge and expertise in each and every area of supply.
- Soft Costs: Direct costs/Hard cost are much easier to measure than soft costs, which are more difficult to predict and assess due to their intangibility. Hence, it is important to consider the cost efficiency, due to – fewer bills, managing fewer vendors for inventory/purchasing and the amalgamation of purchase history from select suppliers.
- Known Ability: It is essential to look for suppliers who have similar industry experience of customer service as your organization. A reliable/respectable supplier is a key differentiator, hence, be sure to make an informed decision (via references, case-studies etc.) when consolidating your vendor base.
- Visibility and Control: For businesses, it is a real struggle to have vigilant visibility over expenditure owing to multiple vendors. Hence having single source suppliers can help in monitoring the product usage and make your business more cost efficient.
- Delivery and Service: Ensuring that service levels received are exemplary is the key to vendor consolidation. Hence, it is always advisable to look for a vendor with requisite warehousing and logistics capabilities that resonate the most with your business criteria.
Vendor consolidation is a time consuming and complex process and to endow a company an even higher buying power/ competitive edge, single-sourcing is the way to go. Tell us more about what you think are important criteria when it comes to vendor consolidation in the comments section below.
