You’ve undoubtedly heard the phrase “less is more,” but does that apply to supply chain integration – and if so, how? It may seem like using fewer suppliers would put a manufacturer in a less stable position, both in terms of bidding competitively and risking the possibility of one of those suppliers going out of business.
However, because supplier consolidation happens after the bidding process, that shouldn’t be an issue – and if you’re only using trusted suppliers, you shouldn’t have to worry about them going out of business. Due diligence goes a long way in making supplier consolidation a reality, and once you’ve decided to do it, you can reap the following four benefits.
#1: WORKING WITH A SMALLER POOL OF TRUSTED SUPPLIERS
The whole purpose of supply chain integration is better communication, so it makes sense that working with fewer suppliers would help to facilitate that. If they’ve already proven themselves enough that you have decided to work with them, then why not work with them even more closely? If you find a supplier who consistently comes through for you, take full advantage of everything they have to offer.
#2: BETTER RAPPORT WITH SUPPLIERS
When you give your suppliers more of your business because you trust them, it puts you in a great position with them. They’ll offer you preferred pricing, more access to extended services, and priority service over less dedicated customers. You can also expect better access to upper management and a greater willingness to provide customized or small shipments.
#3: EASE AND EFFICIENCY WITH SHIPPING
When you consolidate suppliers, you’re ordering more items – and ordering them more often – from those suppliers. This makes ordering and shipping more streamlined, and cost-effectiveness is greatly improved. Shipments can be combined, and because you’re ordering more often, you’ll need to keep less inventory on hand. Essentially, your suppliers will become like an extension of your company, and you’ll get to know their people almost as well as you do your own.
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