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June 13, 2008 Consolidating Vendors Brings Operational Benefits As Well As Dollar SavingsDemand Management With The Business Is Key To Avoiding New Proliferationby Christine Ferrusi Ross, Caroline Roeleveld-Hoekendijk with Onica King |
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Executive Summary
The theoretical basis for vendor consolidation and its potential profits has been out there for quite some time. Yet, many companies are struggling with their supplier base in terms of the number of suppliers. This has to do with the fact that most sourcing decisions are still made on a decentralized level and there's no process in place to aggregate demand properly. But times have changed, and the tools and processes for vendor consolidation exist. The main reason for consolidating your supply base should be operational efficiency: lower costs in relationship management, lower administration costs, less risk to the business, and increased quality and speed in delivery. But consider your organization's level of maturity before ruthlessly starting the rationalization process — take into consideration the internal preferences and company politics, as well as the power balance between you and your supplier.
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