You may be surprised that the answer is one. Well, maybe more than one but certainly far fewer than typically found in most organizations. In our experience, we find that many companies manage relationships with 20 and up to 100 vendors. Considering the hard and soft dollar costs associated with managing multiple vendors, organizations should clearly invest time in consolidating their purchases.
Consider the following benefits. There are many other compelling reasons to consolidate vendors but I think these are the top three.
One Place to Call
As with any vendor relationship there will be occasions when problems and questions arise. It is far less costly and fosters much better communication to hold accountable one contact source as opposed to many within your supply chain.
Simplified, Repeatable Processes
Fewer vendors result in ordering procedures that are greatly simplified and easily retained as opposed to all the differing methods of ordering with multiple vendors. The benefit is clear with the resulting savings in time to process an order.
There are always times when prices must be negotiated and re-negotiated. It is much easier to negotiate with one or two vendors that you do considerable volume with rather than 20 or more from whom you purchase much less. You’ll also have better results.
What to Keep in Mind
A few organizations are hesitant to “put all their purchasing eggs in one basket,” because problems can arise if a vendor doesn’t continuously innovate and bring new capabilities to market or struggles to remain financially viable. To minimize the downside of working with fewer vendors, companies must make sure that the technology and services offered by those few vendors address their requirements. Customers shouldn’t settle for average technology and service just to reduce the number of vendors they work with, since the savings will just be offset by higher operating costs (manually completing tasks, external counsel fees, etc.).
Golden Pacific Systems and its flagship product GPnet™ are continuously innovating in order to offer service levels unsurpassed in the industry. This supply chain technology can make your dream to consolidate vendors a reality.