• May 27, 2015

Consolidating Vendors to Save Money in Business

Consolidating Vendors to Save Money in Business

Consolidating Vendors to Save Money in Business tcs

Consolidating Business to Fewer Vendors Builds Loyalty and Decreases Administrative Needs

Although companies are ultimately supplying goods or services to their own clients, businesses can also be consumers. This comes into the equation when all of the investments for equipment, supplies, and technology are considered. However, the consumerism also continues beyond the point of first developing the company, since maintaining supplies and resources for the office is an ongoing process.

Different Ways of Shopping

It is often interesting to note that even businesses can go about their requisitions in a manner that is similar to individual approaches. Some people will shop around and find the best deals on individual items, while others will simply purchase what is available for the least amount of effort. This also applies to businesses, especially when one set of vendors may be responsible for amenities, such as beverages and water, while several other vendors may care for consumable office supplies or equipment maintenance.

While there are benefits to both approaches, it can be important for companies to weigh the pros and cons that are associated with these practices.

  • Pro – the use of individual vendors can provide item cost saving, but con – cumulative shipping and handling fees can negate this.
  • Pro – using different vendors can mean a wider selection for quality, but con– specialty providers can include non-negotiable pricing.
  • Pro – regional access can include supporting local vendors, but con– local vendor products may also be available more cost effectively through a wholesaler.

One thing that should be noted is that fact that consolidating vendors can still produce the same benefits as shopping around, but can also minimize many of the negatives that are also involved. This can come as a result of selectively evaluating what different vendors have to offer as a whole, but also in evaluating the professional relationship that has been established.

The Importance of Loyalty

Just as a business may reward its own clients for loyalty, vendors often extend this same professional courtesy in business to business relationships. As a result, in selecting a vendor that can meet needs end to end more effectively, the company can also begin to forge an engaged relationship with that vendor. The result is not only that needs are consolidated, but also that:

  • Adjustments to shipment scheduling become more streamlined
  • Collaborative relationships for meeting needs are established
  • Better bulk pricing over a variety of resources
  • Consolidation of handling and extra fees
  • Creating a better partnership that can ensure that future needs are also met

While these points are benefits that can impact company efficiency and productivity, they also represent a fiscal value that is both manifest and sustainable.

Loyalty concessions that vendors make for preferred business customers is certainly one of the prime benefits that can fit into both the manifest and the sustainable categories. As an immediate fiscal boon, this can include specialty pricing and bulk shipping and maintenance costs. While these savings can be reinvested into the company for greater growth potential, the sustainable aspect also comes from building the relationship with the consolidating vendor.

  • Easier billing management
  • Routine inventory checks
  • Lowered administration needs
  • Immediate supply alerts

These are all factors which can also helps to sustain the impact of greater savings through consolidating vendors and building loyalty.

Function, Practice, and Multitasking

Unfortunately, many businesses are also unaware that consolidating vendors is an option for obtaining supplies. Frequently, companies are under the impression that resources by industry are only available through certain channels. As a result, they may also overlook alternative vendors that can better meet needs, and this can impact the viability of certain fiscal choices. However, there are certain pointers that can help to inform this process for an outcome that is better for the budget and for the function of the workplace.

  • Be patient – whether businesses are starting out or are already established, it is always important to fully evaluate the benefits of any vendor before committing to a contract. By taking more time, a more informed decision can be made, but it also gives the opportunity for other options to be presented and considered.
  • Look at value – this not only includes the cost value that any vendor can supply, but also the added quality and service that is included in the relationship. Bottom line costs are not the only way that savings can be determined, but inclusions such as maintenance and restocking fees should also be considered.
  • Start a dialogue – although a company may initially be in negotiations with a vendor for a certain supply, this does not mean that the same vendor may not have other services or resources that are required. Approaching a vendor with a complete list of needs can start the conversation that leads to the ability to consolidate the supply source.

These pointers not only address the savings aspect of looking into consolidating vendors, but they also use the function of the workplace as a guidance for needs. This better establishes the focus for resource goods and services on a demand basis.

Vendor consolidation also has the secondary benefit of saving businesses in adjunct costs. These can include things such as:

  • Shipping fees
  • Merchant taxes
  • Administrative management
  • Greater accounting needs for multiple vendor accounts

This also means that over time, the cost of dealing with one or two vendors will also mean that the business itself can run more effectively, with a greater focus on growth as less energy is wasted on maintenance.

In the end, having resource needs met is the most important part of a vendor relationship, but this can include budgetary resource needs that help to save on overhead costs. Whether this is through gains in greater productivity on the side of the company, or through overall costs of acquiring resources, consolidating vendors can be a viable solution to efficiency, practicality, and improving the function of the company. When this larger picture is viewed, the money that is gained becomes more apparent, through both the direct and indirect means.

    Subscribe to our newsletter