Consolidation of spend with fewer suppliers is one of the simplest but most effective sourcing strategies available. However, many people underestimate the value that can be obtained through this strategy & overestimate the value of the relationship with their existing suppliers.
Consolidating your spend creates a number of changes within the prospective supplier base that is advantageous to you, specifically-
· Your combined spend will probably put you into a higher category of customer, which brings a lower price point. This level should not be underestimated, as a change from a small account to a large account can mean a change of pricing of up to 50% in some industries.
· As a large customer account you will receive a dedicated account manager across the entire group, who can help with areas such as standardisation, issue escalation & price symmetry.
· Standardisation of pricing, products, commercial terms & logistics now becomes possible.
· In most case, contracts can be negotiated on customer terms rather than supplier terms, leading to important commercial & legal changes.
· Ongoing, consolidated reporting can be made available, allowing businesses to have a top down view across all sites to track total spend, product standardisation & compliance levels.
Spend Solutions recently completed a sourcing project for interstate vehicle transport on behalf of a prestigious dealership group, who had 9 sites across 3 states. Traditionally each site managed its own suppliers & as such had different suppliers and terms in place across each site.
By conducting a market tender & identifying a preferred supplier to support the entire group, Spend Solutions was able to identify a 19% annual savings for the client. In addition, Spend Solutions was able to negotiate improved commercial terms, establish ongoing reporting & appropriate performance KPI’s to ensure ongoing supplier performance.