Save Money with Vendor Consolidation

Jesse Hopps

Vendor consolidation is a business strategy whose goal is to provide the same or increased service & quality levels from vendors, while reducing operating expenses related to purchasing from that category of vendor. Sales & Marketing organizations should analyze their Printing, Software, and Consulting, vendor categories to determine where efficiencies can be gained by consolidating to one strategic partner.

Benefits of Vendor Consolidation:

  • Reduced Costs - by centralizing vendor relationships & contract management, fewer managers need to spend their time with vendors. Additionally, strategic purchasing results in lower prices as economies of scale can be leveraged to negotiate favorable terms for competing vendors.
  • Increased Service & Support - having a single partner to outsource your printing or consulting will result in deeper relationships and improved service levels, as the vendor will deem your account to be more strategic to them.
  • Improved Quality - once you have organized your purchasing and send your business to a single vendor, they will improve quality at the risk of losing your contract for the following year. Always expect & demand high quality.

Risks of Vendor Consolidation:

  • Vendor Inflexibility - when working with large suppliers you risk losing the personal touch that comes from partnering with a smaller business. Be sure that you get commitment from your vendors that they will be responsive, flexible, and do what it takes to deliver on your business requirements.
  • No 'One-Stop-Shops' - in some cases, it is very difficult to find a single vendor who can meet all of your requirements. Often, vendors will outsource a particular job to a third-party who specializes in that type of production. Be sure to ask if all jobs will be done in-house, to minimize third-party margins.
  • Vendor Lock-in - with regard to technology vendors, you must be aware of the pitfalls of vendor lock-in, which traps organizations into renewing or purchasing products strictly because of previous purchasing decisions.

Action Plan:

    1. Work from a Checklist - download Demand Metric's Vendor Consolidation Checklist to analyze where money can be saved by implementing a strategic purchasing process and negotiating better pricing.