Vendor consolidation is a key factor in improving a supply chain’s operational efficiency. Selecting from a limited pool of trusted handpicked vendors enables an organization to build stronger, more collaborative relationships, which can deliver a host of benefits, namely – cost effectiveness, lower administration/relationship management costs, better risk management, increased quality/delivery speed, higher supplier responsiveness etc.
We at Moglix believe that vendor consolidation is the roadmap to an agile supply chain and here are our reasons why:
Well-coordinated Product Launch: When it comes to a new product launch of seasonal goods, for example, high technology industry with products of short lifecycles, supplier base consolidation becomes important for the smooth ramp-up of production. Samsung/Apple are great examples of vendor consolidation for better supplier connectivity of their flagship products, which are strategically outsourced to a consolidated, limited, yet long-time supplier base.
Coordination of Daily Activities: To ensure smooth production, manufacturers need visibility into the real-time availability of key components, during active production. Vendor consolidation hence provides transparency into raw material availability, which in turn ensures that the downstream activities are better coordinated.
Improved response Time to Demand and Capacity Changes: For organizations engaging in global trade, quicker response time to demand is of the essence. As per a recent research, 85% of the data required by a company to efficiently run a supply chain comes from its effective communication with suppliers. Vendor consolidation hence facilitates that efficiently and results in quicker response to demand and capacity changes.
Real-time Collaboration: Vendor consolidation facilitates real-time collaboration which helps in tracking demand changes, actual orders against commitments, receiving alerts when there might be potential pre-orders/over-consumption/under-utilization etc. this, in turn, helps in risk management and ensuring that capacity and resources, both meet the forecasted demand.
The agilest supply chains today, are the ones that provide high levels of visibility, mitigate risk and support rapid resolution of issues through strong collaborations, hence vendor consolidation helps organizations stay ahead in the game by facilitating all of the above. Tell us what you think about the role of vendor consolidation in making a supply chain agile, in the comments below.