Running a business takes the assistance of many stakeholders, including vendors that can provide you with products and services that maintain your operations. Although it seems like having multiple vendors can provide you with more competitive pricing and service offering, it actually makes more fiscal sense to consolidate vendors so that you work with as few as possible.
It’s Not a Cost Savings When You are Wasting Time
Consumers like to shop around to get the best price possible. They may opt to use three or four go-to retailers to take care of all their needs because no one store can deliver the best price on everything. This takes considerable time, which may be something a consumer has more of, but companies don’t have this type of luxury.
Time is money, so it’s not worth it to shop around multiple vendors to save some extra dollars, when all that time could have been spent on revenue-generating activities. Plus, the act of maintaining communication and relationships with a host of vendors takes time on top of that. Focusing on one vendor for each area of your business allows you to spend time doing what is required of your job, and thus, actually making your business money.
If it turns out that you don’t think the small number of vendors you are working with is offering the best price and service experience, then you need to start shopping around. You'll be able to achieve a better cost savings especially if you do an annual review to make sure the vendors you selected are still providing the best deal.
Loyalty Draws Money Savings
By standing by one vendor, that loyalty can be rewarded with results that deliver cost savings to you. For example, this vendor may be so appreciative that you chose to stick with them that you could get better bulk pricing, special discounts, and other rewards. These perks might also include supply alerts and billing management services.
Greater Negotiating Power
Most of today’s discounts are based on the volume of business that you give to a vendor. When you consolidate vendors, there is more business funneled to one vendor, which gives you leverage to negotiate a better price for your company. In turn, the lower price provides you with more money to reinvest and further build out your business that will equate to even greater purchase volume from this vendor in the near future.
You will actually require fewer staff if you consolidate vendors because there will be less to do in terms of managing them. This management process was costing you money rather than making you any because it was going toward a non-revenue generating activity. Of course, you can also choose to keep this staff and redirect what they are doing so they become more involved in strategic operations and help build out the business. Whatever direction you take, it’s going to save – and make – money.
Added Cost Savings at Every Point in the Process
The savings add up in other ways when you consolidate your vendors. You’ll also benefit from streamlined shipment schedules, inventory savings, and reduced handling fees. The closer you become to the one vendor for each aspect of your business, the better that relationship will become in terms of understanding and delivering on your needs. The result will be efficiency and productivity gains that will improve your bottom line.
Closer Vendor Relationships
While it may sound strange to say that a closer relationship that comes from working with just one vendor per area can save you money, it’s true. The more relationships you try to maintain, the more complex and impersonal it becomes. When these vendors never really get to know you, they can’t provide any suggestions or assistance that could help lower your costs like one vendor that is interacting with you all the time.
With fewer vendors to worry about, you'll also be able to enjoy a simpler process overall. The various vendors you were using might not use technology that complements each other, leaving you with multiple systems or tools that don't work together. This takes more of your time to use each one separately and can lead to replication of work that is so unnecessary.
Think Before You Act
Don’t just consolidate your vendors for the sake of consolidation because there is clear evidence here that it will save you money.
Be sure you are doing it for the right reason for your specific company and create a plan on how to enact this consolidation. You may not want to do it all at once but gradually reduce the number of vendors you use to ensure a smooth transition.
BluePay stresses the importance of consolidating your payment vendors to streamline your business operation. Learn more about consolidating your payment vendors by checking out our whitepaper. Click below to download.
BluePay is pleased to bring you this valuable information from our partner, Due, makers of a free digital wallet that allows users to easily make and accept payments online.