Vendor consolidation is a great place to focus for any organization wanting to implement strategic sourcing best practices. The more money you spend with a single vendor gives you more leverage and oftentimes results in better pricing.
But better pricing isn’t the only 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 implement strategic sourcing best practices 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!
Vendor Centric is a leading consulting firm specializing in vendor management strategies and solutions. We help our clients implement strategic sourcing best practices and other improvements to their vendor management program so they can save money, simplify processes, reduce risk and create more meaningful, value-driven relationships with their vendors.
Author: Tom Rogers
Tom is the founder and CEO of Vendor Centric, he has been a trusted advisor to nonprofit organizations for 30 years, with a focus on helping them align the right people, processes and systems to mitigate third-party risk and drive more value from third-party contracts and relationships.