Supply chains tend to grow rapidly. Before long, a single company has an unmanageable number of suppliers, all of which require time and resources from supply chain management team members. It’s a common, yet costly mess that adds up in your total acquisition costs. So how do you get out of it?
Supplier consolidation is the process of reducing suppliers. It is a supply chain management strategy that can be implemented within any industry and aims to reduce the quantity of vendors.
For your business, that can mean reducing suppliers down to a few or one single partner depending on organizational needs. As an example, instead of sourcing 500 units of a part or product from 10 or 20 vendors, the same products or parts can be sourced from 1 to 3 suppliers.
If you need a trusted partner in the industry and you’re ready to seek out supplier consolidation benefits, you can turn to Chainlogix. To learn more about how Chainlogix can help your business trim down its number of suppliers, contact us by visiting our website.
Why Are Companies Consolidating Suppliers?
Initially, as you are starting out with a small to medium sized business, you may not see all of the supplier consolidation benefits or feel as though it’s a major priority for your business. This can be misleading because as your business grows, so will the demand for your products, likely leading to an increased number of vendors to deal with if you don’t have a strategy. Before you know it, the complexity and cost of your supply chain has increased dramatically, eating into your competitive advantage.
But through supplier consolidation, the age of working with multiple vendors will become a far-fetched memory. And by working with a strategic supply chain management partner, you can also protect your business.
As the economy grows increasingly interconnected, any major disruption can lead to risk and uncertainty for your business. An example of such a disruption is the Covid-19 pandemic. It emphasized the importance of supplier consolidation and overall highlights supplier consolidation benefits. Restrictions and regulations caused by such an event have negatively impacted businesses that rely on multiple suppliers.
When an organization has too many suppliers, that translates to more routes, shipments, and so on. It can quicky become overwhelming to manage your supply chain in an efficient manner. The price and complexity of allowing a supply chain to grow unimpeded by an undisciplined approach to vendor management greatly outweighs the time it takes to consolidate a group of suppliers.
Supply chain expansion leads to losses, higher costs, wasted time, and mismanagement. For many businesses, it makes more sense to consolidate their vendors and suppliers.
Many organizations struggle taking the first steps to reduce their suppliers. Now more than ever is the time to thin out your supply chain. An ineffective supplier consolidation strategy can reduce supplier consolidation benefits and cause potential unseen risks. Vendor consolidation is an influential and strategic step for your organization if it’s done the right way. To avoid the missteps of supplier consolidation, consider partnering with Chainlogix.
Chainlogix provides supply chain solutions, helping manufacturers reduce risk, lower costs, and improve customer relationships.
Supplier Consolidation Benefits
1. Increase Purchasing Power
The term “more for less” comes into play. When you deal with a single strategic vendor, you’re able to stretch your dollar further. Consolidation leads to fewer suppliers. They will get a larger piece of your market share, which results in lower prices for your business and increases your purchasing power. Also, there are lower transactional costs when you are dealing with fewer suppliers.
2. Minimize Risk
Rather than spending time dealing with various suppliers, supplier consolidation benefits include reducing risk to your company by reducing the number of contact points.
Supplier consolidation benefits include improving your supply chain visibility. Visibility is a key supply chain factor to reduce risk. Rather than mapping out an overly complicated supply chain with multiple suppliers, fewer suppliers can create a clear track throughout each stage of the supply chain process, making it much simpler to manage. When you have fewer players, it is easier to control and manage your supply chain, which reduces risk.
3. Streamlined Process
A streamlined process for your supply chain includes fewer errors and delays. The processes used within your business should cut out inefficient tasks, save time, and increase productivity. A single-source supplier will assist you to monitor product usage and suggest ways to reduce costs across your business. Overall, supplier consolidation leads to higher procurement process efficiency. Streamlining also plays into reducing risk across the entire span of the supply network.
4. Reduce Costs
Complexity can cost you money. When you spend less of your day in multiple vendors meetings, phone calls, paperwork, and legal contracts, you save time and money. Handling and transportation fees can also go down when you are working with fewer suppliers.
With supplier consolidation, you can reduce the number of middlemen needed throughout the process. Cost savings also come from internal employees who can shift their focus on more important tasks within the business rather than dealing with vast networks of suppliers.
5. Improve Supplier Relationships
Relationships are key to business, maintaining good relationship should be high on your priority list, particularly with your supplier. When you are working with multiple suppliers, you lose the personal aspect that comes with partnering with a few valued suppliers.
You can develop closer, stronger relationships that you would not have the time for when juggling numerous suppliers.
The key to consolidation is guaranteeing the service levels you have are second to none. It doesn’t matter how varied a product choice is if the product is out of stock or the supplier does not deliver within your time constraints. Look for a supplier with logistics and warehousing capabilities that meet or exceed the needs of your business.
Superior supply chains aren’t just rapid and cost-effective, they are agile and adapt with the times. Let Chainlogix handle consolidating your supply chain. Chainlogix supply chain management services cover everything from product development, sourcing, and production to logistics and the information systems needed to coordinate these activities. Click here to find out more now!