Vendor Consolidation: Key to Strategic Sourcing

It is a time-consuming task for any procurement organization to juggle too many vendors. An illimitable supplier base leads to an increased amount of time, effort and workload for getting the best possible value/service. This holds especially true in the case of MRO supplies and daily consumables wherein, an unconsolidated vendor base poses to be an enormous logistical challenge.

Consolidating your supplier base, hence, is a worthwhile pursuit, as it helps in increasing an organization’s service/quality levels, whilst reducing the procurement and operating expenses. In fact, as per a recent research by Oxford economics, over half (65%) of procurement practitioners say procurement at their company is becoming more collaborative with suppliers, as it has a better pay off.

If you’re still debating the pros and cons of vendor consolidation, let Moglix tell you how vendor consolidation is the key to strategic sourcing for any organization:

1. Cost Reduction and Increment in Purchasing Power: Dealing with fewer vendors means an increase in control and visibility of the organization’s purchasing. This, in turn, makes the orders, easier to track and manage, thus, leading to a better management of time, multiple orders, deliveries, billing etc. A limited supplier base can also facilitate a higher volume of orders, making vendors willing to lower pricing; mounting to major cost reductions in the long haul.
2. Improved Vendor Relationships and Management: One of the major disadvantages of wide vendor base is the difficulty in nurturing profitable vendor relationships. Consolidation of products and services with a limited supplier base leads to an improvement in service quality, as well as better vendor management.
3. Improved Quality: Streamlining your vendor base by selecting a single source supplier would make your account more strategic to them, resulting in them improving their quality to minimize the chances of losing transactions.

Though Vendor Consolidation is a time-consuming task, the benefits are worth the workload, which would ensure that the organization makes the most of its vendor relationship. Tell us more about what you think of Vendor Consolidation and its benefits in the comments section below.