Vendor Consolidation: The Secret to Strategic Sourcing

What we cover in this blog?

• 5 Key Core Principles For Good Vendor Consolidation strategies
• Benefits Of Vendor Consolidation
• Best Practises

At Violin Technologies, engaging with the right vendors is equally important as with our clients. Violin Technologies is the right vendor consolidation partner and the apt extension for the supply chain team.

Strong vendor relationships with a reliable vendor consolidation partner are formed through a robust sales team that orchestrates suppliers, clients, and operations. Correct and transparent communication gives relevant business opportunities, adequate cost savings, and updated lead times.

At Violin Technologies, we manage multiple vendors through our reliable operations team valuing quality and lead times.

As a business grows, the major competitive advantage lies in achieving the best supply-chain strategies. A considerable amount of revenue is spent on raw materials, which is why organizations look to outsource them to the right vendors. The need for automated vendor payment becomes greater when multiple materials come through multiple vendors. Proper vendor consolidation can help the company save a lot of effort and time and gives it scope to focus on its core business than managing a part of it.

5 Key Core Principles For Good Vendor Consolidation strategies

The five principles for great vendor consolidation are

1. Coherence
2. Alignment
3. Rigour
4. Commerciality
5. Openness

Benefits Of Vendor Consolidation

• Improved quality: Consolidating your vendor base and having a single supplier makes your expenditure more strategic. A limited supplier base for your services and products is ideal for improving the service quality. A limited supplier base also leads to a higher volume of orders, which makes vendors lower their prices and thus reduces your costs with a greater quality of your product.
• Minimized shipping costs:  It costs less to ship separately when there are fewer providers. For the organization, this benefit may lead to significant savings. The fact that a company will save even more on freight costs if it chooses to work with local vendors is an extra benefit of this.
• Reduced purchasing costs: Companies can get a better price for a product by assigning more resources to a smaller number of suppliers. The purchasing power of a company increases as its supplier base decreases. The intensity of your greater order quantity frequently enables you to obtain better rates and reduce freight, handling, and other costs.
• Increased control of purchasing power: Vendor consolidation means having a single vendor as a partner or fewer vendors, which means spending more time and resources on increasing the visibility of the company’s purchasing pattern. In simple terms, it is to have more power in tracking and managing the company’s orders, billing, and deliveries.
• Reduced risk: Your business can better concentrate on safeguarding all applicable risks along the supply chain if it has fewer suppliers to monitor. Your business can put more effort into enhancing compliance and other legal guidelines.
• Improved vendor relationships: Focusing on establishing connections with essential suppliers is simpler when there are fewer suppliers to oversee. The main suppliers will gain more of your market share by consolidating a supplier base. Your company’s pricing will decrease due to the increased market share for your key suppliers.

Best Practises:

Practicing effective vendor consolidation leads to implementing strategic sourcing and a good amount of focus. The number one rule is to have very few vendors or a single vendor, which would give you more leverage in negotiating the best deals for your product.

Optimize labor management by adopting good in-class management techniques that streamline vendor consolidation. The top three best vendors and supplier management practices include having a vendor management system, vendor consolidation, and a managed service provider. Such systems help companies achieve their proposed goals and strategies most cost-effectively.

Ultimately, all these best practices merge to analyze your business model and spot the optimum balance between supplier, vendor, operation cost, product price, quality, and delivery performance.

Several clients have highlighted the benefit of multiple suppliers as opposed to a single one, but ultimately it all boils down to your company’s goals and specifications.

Conclusion:

Vendor Consolidation is all about strategic sourcing, and we at Violin Technologies specialize in cable and harnesses, custom PCB assemblies, pulleys, sheet metals, forged parts, and hydraulic assemblies. We aim to meet the clients’ expectations within the deadline to manage with the right sourcing strategies.

Minimum transactions are the goal of streamlining your vendor base, and it maximizes the value and reduces the risk associated with the product. Thus vendor consolidation is a way to transform buyer-supplier relationships. Spend wisely because this can make or break your company goals. Remember, better prices with fewer suppliers by giving them greater resources is the key to consolidating.

With fewer suppliers, the cost of implementing a supplier for internal systems to complete transactions and manage several relationship hassles with multiple people decreases. It is a time-consuming task, but the benefits are worth the pain. Making the most of just one relationship with a vendor goes a long way in cost-saving and building the right amount of trust.