I’m sure you know the pricing benefits you can often get from vendor consolidation. When you spend more money with a single vendor it provides more leverage and, oftentimes, allows you to negotiate better pricing.
But price leverage is only one benefit to consolidating vendors.
We recently completed a project with a client that highlighted all of the benefits of vendor consolidation. Here’s what happened:
Our client operates in nine different locations throughout the United States. Each location does its own purchasing and establishes its own vendor relationships. The new CFO wanted to create a more strategic approach to sourcing across the entire organization, and vendor consolidation was a big part of his plan.
In working with the CFO to create a thoughtful approach to the process, we identified eight expense categories to tackle and decided to start with the low hanging fruit. In this case, business, facility and janitorial supplies. When we started the project, the company's sourcing of supplies at all locations looked like this:
Five (5) different office supply vendors
Eight different (8) janitorial supply vendors
Eight (8) different water vendors
No contracts with any vendors
Multiple online ordering systems
15-20 invoices a month, plus lots of credit card charges that needed to be coded and approved as part of a separate process
Over four weeks we worked with their team to understand their buying needs, evaluate options and create a more streamlined strategy and process for sourcing these supplies. When we were done it looked like this:
One vendor for office supplies, janitorial supplies, break room supplies and water
One ordering system
One monthly invoice
One Account Manager responsible for the success of the account
Vendor consolidation did save the company money, but it also simplified and streamlined ordering, invoicing and payment processing. And it provided the company with a single point of contact to resolve problems and provide ideas for further improvements down the line.
If you want to get the advantages of vendor consolidation for your organization, here’s what I recommend:
Start with the easy stuff – you’ll get quick successes and build momentum.
Involve key buyers in the process – you need buy-in to make this work.
And, when selecting your vendor(s), look for the greatest ROI…not just the lowest price!
Tom Rogers is CEO of Vendor Centric. You can reach Tom at email@example.com. You can also follow Tom on Twitter @TRogersCPA.