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Vendor Consolidation

What is Vendor Consolidation? (6 Benefits for Your Business in 2023)

February 5th, 2021 | 6 min. read

What is Vendor Consolidation? (6 Benefits for Your Business in 2023)

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Are you constantly spending time ordering supplies for your business? Do you find yourself ordering from multiple websites or shopping at wholesale clubs to source all the products you need to keep your business running?

If you fall into either one of these categories, it may be time to consider vendor consolidation. This cost-saving strategy offers a wide range of benefits, from helping your business save time ordering supplies to reducing your overall supply costs. 

Here at Egyptian Workspace Partners, we realize the search for a new office supply vendor is anything but easy, which is why we're here to help you find a supplier that can provide you with everything you need to operate your business successfully. 

In this article, we'll break down the benefits of vendor consolidation. We'll also help you understand what vendor consolidation is and how it can help your business say goodbye to wasted time, money and multiple vendors.

What is Vendor Consolidation?

Vendor consolidation (or supplier consolidation) is a supply management strategy that has risen in popularity over the last decade. To put it simply, it's the process of reducing the number of vendors you order from to just a small group of reliable vendors or even a single partner.

For example, let's say you order your office supplies from a big box store like Office Depot or Staples and you regularly pick-up office supplies from local brick and mortar stores in your area. 

On top of that, you may use a local janitorial supplier for your paper and soap products, order toner from a company that specializes in that product and  buy from a local wholesale company for coffee, cups and other breakrooms (with occasional Amazon orders sprinkled in). 

Ultimately, the goal is to consolidate as many of these categories into purchasing from one company to help you save time and reduce your costs. 

The Top 5 Benefits of Vendor Consolidation

1. Cost Savings

What is Vendor Consolidation? (6 Benefits for Your Business in 2021)

As a business owner, your accounting department is a valuable asset to your company, and the last thing they want to do is waste time stuffing, mailing, collecting or reconciling checks for multiple vendors every single day. 

When it comes to vendor consolidation, there are two factors that drive the cost of supplies. Hard costs refer to the price you pay for an item, while soft costs are the internal costs you pay to procure an item. 

In fact, as much as 60 percent of supply costs lie in the time it takes to find the correct vendor, identify the right product, generate a purchase order, place an order, distribute the order, pay for it and deal with issues like returns or warranties. 

If you're wanting to save money, the best way to reduce your overall supply costs is to work with a single vendor supplier, so you can reduce soft costs like fuel or the time it takes to deliver your items. 

Once you consolidate vendors, you'll be able to place higher volume orders, leading to better pricing, lower shipping and handling fees, better use of your time and an overall increase in your purchasing power. 

2. Time Savings

Having multiple vendors for everything is a huge waste of company time and resources. With vendor consolidation, employees can spend less time procuring supplies, navigating between multiple websites and making mid-day trips to wholesale clubs. 

When you have a single vendor partner, all your employees can order from the same website. They'll also receive fast and easy training, have fewer vendor meetings to attend and be able to focus on more important work-related tasks.

Having multiple vendors for everything is a huge waste of company time and resources. With vendor consolidation, employees can spend less time procuring supplies, navigating between multiple websites and making mid-day trips to local wholesale clubs. 

When you have a single partner, all your employees order from the same website, so they spend less time shopping around for the best deals and you can streamline your ordering process (while achieving significant time and cost savings). 

In addition, your employees will be able to receive fast and easy website training, have fewer vendor meetings to attend and spend their time doing more important work-related tasks.

3. Increased Buying Power

When a business reduces its vendor base, their purchasing power significantly increases. By allocating more resources to a single supplier, they can leverage their partnership and receive more product for less money.

Instead of splitting your purchases out amongst multiple suppliers, you can use your entire volume to buy from a single vendor partner and drive better economies of scale for your business. 

For instance, if you spend an average of $250 with five vendors a month, each supplier will raise your prices to cover the cost of fuel, wages and time it takes to deliver your order. 

However, if you eliminated 80 percent of your vendors, you would have two monthly orders, one at $1000 and a second at $250. The supplier with the $1,000 order will have better economies of scale because they didn't incur additional any additional costs and they can pass their savings along to you.

4. Better Vendor Relationships

If your business relies on multiple vendors, it can be challenging (and nearly impossible) to build relationships. When you have fewer suppliers to manage, it's easier to build long-lasting relationships with the vendor partners you rely on and truly trust. 

A vendor partner who gives you access to a dedicated account manager can't be valued enough, because they'll speak up for you, take care of you and have a deep understanding of your unique needs when issues arise.

Plus, when you exclusively work with one supplier, more volume flows through a smaller set of vendors. This means your vendor partner will be more invested in your business and they'll go out of their way to maintain a valuable, long-lasting partnership with you. 

5. Improved Accounting and Reporting Function

Some organizations have a difficult time understanding where their money is going, especially when they're using more than ten vendors to source all their supplies or they're overlooking costs like accounts payable processing. 

Accounts payable processing is the time it takes to receive an invoice, allocate it, get internal approval and generate the payment. On average, companies with simple processing incur a cost of $12 to $30 per invoice, while more complex processing costs range from $40 to $100 an invoice.

For example, let's say you use ten vendors a month and have 25 invoices at $20 apiece, costing you a total of $500 per month to process all the invoices. If you have ten locations all using ten different vendors, that means you'll pay $60,000 in accounts payable processing costs for the entire year. 

In addition, you'll have to source and piece together usage reports from multiple vendors, which can be extremely time-consuming and slow down your reporting efforts.

As an alternative, working with a single vendor partner means you'll only have one invoice to track down, pay and process each month, as well as fewer usage reports to sort through and organize.

6. Single Customer Support Team

When issues arise, having a dedicated account manager and customer service team can’t be valued enough. After all, no one wants to spend hours tracking down missing packages or exchanging incorrectly ordered items every single day.

By having a single contact for all your orders, you can worry less about communicating with third parties when something goes wrong. Instead, you'll be able to find a solution to your problem in less time and you won't have to waste time talking to a random stranger on the phone. 

Additionally, you'll only have to worry about one order, one delivery method and one invoice. Even if you can't consolidate to a single vendor, you can still find big savings by significantly reducing your total number of suppliers.

Is Vendor Consolidation Right for You?

If you’re tired of wasting valuable time, vendor consolidation is definitely for you. Not only will it help you reduce costs, but you'll be able to streamline your ordering process for multiple product categories.

When consolidating vendors, you'll want to look at all the categories you're buying, as well as the companies you purchase supplies from. At the end of the day, having one supplier for as many products as possible should be your goal.

As a single-source supplier, Egyptian Workspace Partners can help identify ways to help you save time (and money) by analyzing invoices from your current vendors to perform a business product audit

We'll use your business product audit to help you consolidate vendors, reduce your costs, support a fellow local business and most importantly, bring value to your organization. 

Want to learn how Egyptian is your single source for business products, interiors and technology? Schedule a showroom visit or a virtual introduction with a Workspace Partner today! 

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