Most companies rely upon business-to-business relationships with some number of other companies to thrive — for raw materials, components, paper for the copy machine, or what have you. A certain degree of diversity is necessary (copy machines are pretty common). However, when your business operates within a focused supply chain, the benefits of vendor consolidation can be felt immediately.
Vendor or supplier consolidation is the process of reducing the number of external companies you work with for the sake of efficiency. Perhaps your business purchases electronic components from 10, 12, or even 20 different vendors, depending on the parts needed, to fuel your manufacturing efforts. A consolidated supply chain focuses your budget on relationships with a small, carefully vetted list of trusted suppliers.
3 Core Benefits of Vendor Consolidation
Streamlining your vendor relationships has many potentially game-changing benefits, including greater purchasing power, stronger relationships, and improved process efficiency.
1. Greater Purchasing Power
The amount that you invest in a relationship with each individual vendor correlates directly with your value to that vendor. Rather than spreading your spending out amongst a large number of companies, focused spending with a short list of preferred partners will mean more order volume and more negotiating power.
It’s easier to negotiate better contract terms, price points, or cost-saving conveniences when you’re able to leverage a high-buying position. Also consider the savings on a reduced number of freight companies you’ll need to deal with when shipping the vendor’s goods. In other words, your more focused spending translates into another of the big benefits of vendor consolidation: lower overall costs.
2. Stronger Relationships
With fewer vendors to manage, you’ll find it easier to cultivate a strong relationship with your core group of suppliers. It takes time to communicate and refine a relationship for better efficiency, quality, responsiveness, and results. Time is a premium commodity in the supply chain. With fewer slices to divide your time pie into, each vendor stays more closely aligned and develops an intuitive understanding of your business needs more quickly.
There’s also something to be said for having only one point of contact to keep track of, rather than spinning the digital Rolodex (or an actual Rolodex...does anyone still use those?) every time you need to solve an issue or ask a question. Keep your handful of preferred vendors on speed-dial and reap the benefits of faster, superior service.
3. Improved Process Efficiency
Both the obvious and less visible transactional costs of your vendor or supplier relationships add up quickly. More vendors will mean more internal systems to set up, more processes to align, potentially more training for relevant staff, and more time spent managing or troubleshooting the supply chain.
One of the most important benefits of vendor consolidation is simpler processes. You’ll have fewer protocols, platforms, and interfaces to set up, learn, and keep track of — and you’ll be more expert in the ones that are left. This translates into improved process efficiency, greater productivity, and ultimately, better business performance.
Streamline the Supply Chain With Sensible Micro
A supplier consolidation strategy can be game-changing. Work with Sensible Micro as your preferred electronic components supplier and reap the benefits of vendor consolidation without sacrificing the advantages of a resilient, diversified network. Our carefully vetted hybrid line card gives you access to authorized, factory direct, and independent components of high quality, from flagship processors to niche and obsolete components. Contact us today to learn more about the advantages of using a hybrid distributor as your primary source for the parts you need.\