Rationalize your vendors, today!

Very often it so happens that organizations find themselves with a large number of vendors or service providers to support their IT requirements. Out of these providers, very few are strategic to business as for most of the part, many perform conventional, commodity type services which the organizations outsource rather than using their internal resources. Definition of “large” number of vendors vary from firm to firm. For some it may be hundreds, while for others twenty to thirty may be a considerable amount. Whether the number is tens or hundreds, multi-vendor management is complex, time-consuming and costly. More vendors mean a huge cost for ordering, maintaining/updating records, generating invoices, and maintaining relationships.

On the contrary, fewer vendors mean more orders/volumes to the existing vendors and therefore bulk-discounts or lower costs for more volume of business. Another advantage is that vendor base performance is improved, removing vendors who are performing poorly and/or are costly to organization results into improved quality of service and better customer satisfaction. Reducing your vendor count can also improve entire procurement process. Partnering with a few good vendors gets you a competitive advantage. Strategically partnering with your vendors might help you come up with new ideas, technology, products, services that will give you an edge over your competition.

Vendor base rationalization is a key element of vendor relationship management to align and synergize competencies resulting in a win-win situation for both your organization and vendor. This is done by selecting a few vendors for strategic long term partnership, involving them in product design from start, providing relevant and necessary benchmarks/feedbacks, monitor the performance of the vendor and evaluate their progress.

Companies must spend time to evaluate their current vendor base and analyze future vendor relationships, as vendor rationalization is no longer a luxury, but has become a necessity. Importance of vendor rationalization is clear – a sound methodology can help reduce cost and improvise product/service quality and customer satisfaction.

About Author:

Nisha Tolani is consultant and part of Systems Plus Pvt. Ltd. She is a part of consulting team that delivers Sourcing and Vendor Management Office projects. She can be contacted at: nisha.t@spluspl.com