Nowadays, it seems every manufacturer wants to consolidate their vendors. If you’re considering this option, we don’t blame you. Navigating your maze of contacts can reduce efficiency, reduce profits and inspire a colossal headache. To help educate you on the genius of vendor consolidation, we’ll cover the main areas:
- Demystifying vendor consolidation
- Determining if vendor consolidation right for you
- Vendor consolidation with KS Tooling
- Benefits of consolidation
- Challenges to vendor consolidation
- Employing an MSP
- Using the In-House Method
You’ll master the basics of what vendor consolidation means, how it can invigorate your business and how KS Tooling can help.
What Is Vendor Consolidation?
You’ve heard rumors of vendor consolidation, but what exactly does it mean? Business concepts often overwhelm people with unfamiliar terminology. Thankfully, vendor consolidation only sounds complicated — it’s actually quite simple. First, let’s cover the terms themselves. You know the word “vendor” refers to a business which sells a product, and “consolidate” means to bring together. Instead of ordering items from separate businesses, you just consolidate your purchases by using a single vendor.
Who Needs Vendor Consolidation?
Over the years, it’s easy for a business to accumulate a horde of vendors. As a company expands its product line, new suppliers come into play. Eventually it gets overwhelming. With a disorganized mob of vendors hawking their parts, confusion takes hold. Many businesses remain fixed in their old ways even though it may not be best. Buying separate parts from a handful of providers often leads to complications, and by shopping from disconnected vendors, manufacturers miss the opportunity to consolidate their orders, losing time and money. Successful manufacturers run their businesses like the machines they make. A well-built product leaves out all redundancies. Likewise, an efficient business thrives on a clockwork system of receiving shipments from reliable vendors. Simplifying the supply chain invigorates businesses by freeing up time, resources and manpower. Cut the fat and keep your business hungry and lean. With vendors, less is more. This philosophy has spread among manufacturers. The far-reaching benefits of vendor consolidation has revolutionized how businesses regard their suppliers. If you rely on a network of vendors, consider consolidating them into a chosen few — or if you’re lucky, a single provider.
What We Do at KS Tooling
Since we began KS Tooling, manufacturers come to us asking for custom metal parts. For over 25 years, we have provided our customers with the finest, most precise metal stamping available. Our customers employ our products for use in every project size imaginable. We can tackle any demand, big or small. We boast a reputation for supplying the medical sector with crucial parts for lifesaving EpiPens, but we accept any challenge. We craft intricate parts for timepieces, custom automotive connectors for Hybrid vehicles and Airbag sensors. We constantly expand our arsenal of parts to serve our expanding customer base. Our exceptional service pumps out parts to 13 countries like clockwork, using our daily shipments. It’s easy to simplify your job through our complimentary services in design, inspection, packing and shipping. We endeavor to make manufacturing simple and easy. We maintain firm partnerships with our clients and include perpetual maintenance on our work, regardless of the shipment size. We proudly state that we’ve passed on over $4 million in savings to our customers to date.
KS Tooling Vendor Consolidation
At KS Tooling, we make vendor consolidation a breeze. We work closely with our customers to secure the best, most cost effective solutions for their consolidation needs. Our expansive offering of services gives our customers a multitude of options. What we don’t already create, we procure. After all, we stake our reputation on providing a solution for your manufacturing requirements. With nearly no limitation to our potential to improve our customer’s operations, it’s no wonder a growing number have decided to consolidate their vendors using KS Tooling. Our flexible approach makes it easy to fill every order with our services. For familiar, long-time customers and new clients alike, we exert the maximum effort to streamline the process of vendor consolidation.
Benefits of Supplier Consolidation
Using consolidation for your vendor management model affords a number of advantages. Through the task of bringing your vendors together, you reap untold benefits. They include:
- Increased efficiency
- Cheaper delivery
- Reduced surcharges
- Increased accountability
- Reduced description of requirements
- Increased return on investment (ROI)
- Easier training for future employees
- Building a solid relationship
Save yourself time and money by streamlining your orders through a single vendor. On the surface, it sometimes seems cheaper to buy from separate dealers. This approach fails to factor in time and effort costs which accompany the effort required to manage disconnected orders. For instance, say you’re a pickle farmer. Who doesn’t like pickles? And you got the best ones. To package your product, you buy labels from a print company and your jars from another supplier. Even though the jar company also manufactures labels, they happen to cost a little more, so you go with the cheaper label makers. But sometimes the labels come back wrong. They don’t fit the jars, or don’t adhere to the jar’s material. Maybe they even spell “pickles” wrong. Now you’re sorting through the mess when you should be selling pickles! We know your business likely involves more complicated components than pickles, but the example shows the downside of diversifying vendors. Not only can miscommunication lead to unforeseen circumstances, but dealing with disconnected dealers also takes up valuable time. For instance, in buying from two isolated companies, our hypothetical pickle farmer wastes twice as much time. Even when orders come together perfectly, you squander time by coordinating between dealers unnecessarily. You’ve heard the business adage “time is money.” Consider how consolidating your vendors can save you time by streamlining your orders.
When you buy from separate vendors, the cost of delivery multiplies. It’s simple mathematics. With every additional dealer you employ, your delivery surcharges increase by the multiple of dealers your use. If you hire five separate suppliers instead of one, you pay five times the delivery fees. The lesson here isn’t hard to learn. Cut back on the number of vendors through single vendor consolidation, and your delivery costs will reduce by the number of reductions made. Save money by shipping items in one order, from a single, consolidated vendor. Not only will your delivery overhead diminish through vendor consolidation, you’ll save time due to minimal paperwork. Sorting through piles of order forms eats up valuable time. If you’re running a large operation, delivery order forms can easily pile up, draining your resources. Vendor consolidation with regard to delivery orders will:
- Simplify the process
- Decrease your stack of paperwork
- Allow you to allocate employees to other tasks
- Increase efficiency
- Save you time, money and headaches
Get all your orders from one supplier. There will be one order, with minimal paperwork and maximum efficiency.
With some companies, a number of transaction fees accompany each individual order. By consolidating your orders with one vendor, you pay less of those annoying surcharges. Buying in bulk also yields volume discounts. Ditch those all the meticulous fees associated with unconsolidated orders and buy it all from a single source.
If you employ multiple dealers, responsibility becomes decentralized. Occasionally, a dealer will make a mistake. To err is human, as they say. If you rely on several vendors, though, the likelihood of a mishap occurring with one increases with each successive vendor. Keep in mind, your operations are only as strong as your weakest dealer. By pooling all your orders under the auspices of a single vendor, not only will you decrease the risk of an error, but that single dealer will feel greater responsibility. A dealer with multiple orders coming from a client will naturally prioritize that customer. It will also facilitate easier integration of parts within the order, whereby ensuring all the parts are compatible.
Reduced Description of Requirements
You only need to explain your order to one dealer when you consolidate. In operating under a multi-vendor system, you must describe your intentions in making an order for a part —to each vendor. For instance, that vendor requires specifications to guarantee a product’s compatibility with other items. You may find yourself acting as an intermediary between your separate dealers. You need to constantly verify that both vendors understand your requirements. This can eat up time and unnecessarily increase the chance of miscommunication. The obvious alternative is vendor consolidation. Cut down on talk-time and risk.
Increased Return on Investment
In short, you will gain greater profits from your initial investment. All the reasons we’ve covered point to a higher return on investment (ROI) using vendor consolidation. With this streamlined system in place, you’ll experience an improved time to launch for products. Your operations will enjoy the infrastructure of your highly effective consolidated vendor system. You’ll cut back on the time between design and actualization of new products, through the auspices of your concrete partnership with your super vendor.
With your integrated system of vendor consolidation in place, new recruits will master their roles immediately. Nothing spells trouble like teaching new hires an outdated and complicated multi-vendor platform. The possibility of error almost seems inevitable. With a simple and effective consolidated vendor, new employees can acclimate in no time, reducing their resource requirement. Leave them alone, and let them do their job. They’ll do fine.
Building a Solid Relationship
When you commit to a single dealer, you forge a long and trusting partnership. Your supplier comes to know your needs, preferences and orders. You grow to value the trust built with a reliable dealer. By consolidating your vendors, you save time and money while achieving optimal service from a dependable affiliation. Yes, the honeymoon does sound cozy, but achieving vendor consolidation involves some necessary work.
Many people maintain an apathetic attitude toward change. They regard the status-quo as functional. After all, the business still runs. Since switching to vendor consolidation involves some work, they feel inclined to continue along the same path. Don’t let ambivalence define your decisions. Learn what’s really required to consolidate your vendors. It’s not that difficult, as you will see.
Organizing All Your Vendors
Some companies order from a multitude of vendors. To consolidate them, a certain amount of sorting must be undertaken. You need to comb through all the contracts in place for vendors. This necessitates a concentrated effort. Put aside time and resources for this task. Compare advantages with each vendor, weigh the long-term value of consolidation and analyze the details of the contracts.
Department Based Cost Analysis
While you pour over all your vendors’ contracts, pay attention to the role of the relevant departments. Your changeover will involve various departments on both ends: yours and your vendors’. Consider how the switch will affect IT leaders, Accounts Payable, Human Resources, Vendor Management Offices (VMOs) and Procurement. When you’re analyzing how vendor consolidation affects every aspect of your operations, ask yourself:
- What will be best to involve and utilize the departments?
- How will consolidation affect various departments?
- What is the foreseeable result of consolidation for the departments concerned?
- Which contractual obligations will affect both your and your partner’s departments?
Consider the effects from a long-term cost/benefit standpoint regarding departmental operations. Use the resources at your disposal. Employ the right department to investigate the impact of consolidation from the standpoint of your vendor’s departments. It might be a long process to adequately understand the implications of consolidation. Don’t rush this step —you don’t want to waste time or money or miss any important details.
Prioritizing Departmental Needs
Each department within your company tends to focus on general areas of expertise. When preparing for vendor consolidation, consider the viewpoints of each department with regard for their concerns. Sometimes the priorities of the departments may conflict with each other. In the world of business, different departments will scrutinize the merits of vendor consolidation from their own perspective. Listen to their advice while noting their mind-sets. Some common proclivities which departments appear to demonstrate include:
- IT leaders assess a vendor’s value based on their aptitude to guarantee superior service and products.
- Human Resources evaluates issues with consideration for codes of action and performance.
- Vendor Management Offices (VMOs) prioritize swiftness of transactions.
- Procurement crunches numbers to get the best price for products at the longest term available.
Utilize the best advice from your team of departments. Communicate between departments to facilitate an effortless transition to vendor consolidation. Be vigilant in targeting areas of misalignment between departments and address issues with full consideration.
Compare Quality Among Vendors
Which vendor gives you the best products? It might sound like a simple question, but calculating value requires a qualitative assessment. When choosing whether to consolidate your vendors, do a subjective analysis of the various vendors’ quality of product.
Often value cannot be easily measured by numbers. An in depth comparison of products will help determine your decision to consolidate your vendors.
Schedule standard evaluations of the products you receive. Consider the quality and try to appraise the excellence using measureable variables. These routine evaluations will help your company to build a reliable partnership with consolidated vendors.
Can’t Someone Else Do It?
There’s nothing shameful about not wanting the task of organizing your vendor consolidation. After all, it’s a tough job. Thankfully, an option exists: Managed Service Providers (MSP).
Pros and Cons of MSPs
For the arduous task of vendor consolidation, a company may hire a Managed Service Provider. An MSP basically does the dirty work. They see how best to organize the transition to consolidated vendors. By assessing your company’s needs, they choose the best vendors based on metrics such as price, quality and other factors.
Outsourcing this task seems like a no-brainer. It’s always better to hire a professional. You wouldn’t refurbish your kitchen without the input of a plumber, so naturally you should enlist an expert to aid your vendor consolidation.
Conservation of Resources
Using an MSP allows you to tend to your business as normal. They facilitate the consolidation while you take care of keeping your business running. If you’re undergoing an especially challenging period for your operations, hiring an MSP can be a lifesaver.
Even if you can handle the task, you may prefer to not reallocate your resources to deal with the job. Like it or not, you will feel the disruption of preparing for vendor consolidation. By its nature, it requires a degree of concentration and effort.
In business, even a small sacrifice of time and resources may cause reverberations in your company. However, if you can give the task adequate resources and attention, significant gains accompany the choice to perform vendor consolidation yourself.
Reasons to Go It Alone
You know your business better than anyone. In outsourcing vendor consolidation, the MSP might miss some vital details. If you use your own departments and resources, then you can oversee the decisions more closely.
You know which aspects to prioritize better than anyone. Your company mission and targets play a major role in facilitating an organized and ideal outcome. You will also maintain contiguous interaction with your chosen vendors yourself. They need to know your priorities to help achieve your goals. Who better to communicate your demands than yourself?
Using this “in-house” method allows you to oversee the entire process with a watchful eye. This alternative to handing the reins to an MSP results in a predictable outcome. You control the progress while utilizing the strengths of your departments. This method also encourages the consideration for how consolidation might impact the departments themselves. You maintain a tight partnership within your business while improving bonds with your vendors.
By opting out of an MSP, you foster a close relationship with your vendors throughout consolidation. This helps to set the tone of future interactions. Your vendors will appreciate you evaluating their worth.
Because you took the time to deal with them directly, they will likely regard your business highly. If your vendors maintain a favorable opinion of your company, you can bet they’ll prioritize your requests. Moreover, they will take it as a compliment that you chose them after careful, personal deliberation.
Arrange to Review Partnership
During this period, establish a schedule for meeting targets with your vendors. Setting up periodic reviews will improve your long-term development goals. In these prearranged product evaluations, include attention to continuously reviewing product quality. Creating the format for amicable reviews hinges on the positive and respectful partnership built through personal interaction during consolidation.
The foundations of a tight bond with vendors come from the time spent communicating with your chosen partners.
Learn Their Strengths
You also gain knowledge of your vendors’ strengths and shortcomings. Carefully deliberate their potential to help your business before choosing them. It becomes difficult to fully appreciate the intricacies of a vendor’s value and build a strong partnership if you give an MSP control.
Consider Vendor Consolidation With KS Tooling
Whether you decide on in-house or MSP employed consolidation, KS Tooling can help.
We, at KS Tooling, look forward to aiding in your vendor consolidation. We’re confident that we will provide the best solution for your business. You can continue to expect only the finest service from KS Tooling. Let us help you reap the benefits of consolidating your vendors — today.