Reducing vendor redundancy helps meet customer expectations and ensures regulatory compliance

By Dan Lean, Vice President Strategic Accounts, SupplyOne, Inc.

Vendor consolidation should be a priority for mid-sized manufacturers and food processors. Simplifying vendors and deciding with whom to work based on a rigorous analysis of packaging needs, process, and customer requirements ensures that critical needs, customer expectations, and regulatory compliance requirements are met. Consolidation can also be a conduit for other operational expense items, such as safety and janitorial products. Read on for more on the impact of vendor consolidation and find out how manufacturing companies of all types have benefitted.

Ten key benefits of vendor consolidation

Vendor consolidation is a supply chain management strategy process adopted by high growth companies to meet critical needs while increasing throughput and packaging performance. The strategy also provides companies with the ability to leverage other needs, including janitorial products, thereby consolidating the vendor base even further. Here is a list of the top ten benefits of vendor consolidation:

1. Product cost savings – The desire to purchase products at the lowest price means investing time to obtain quotes from multiple vendors, but it can also lead to buying more than required to get a low price. Streamlining vendors combines once fragmented purchases and increases quantities, which improves economies of scale and lowers product costs.

2. Lower freight costs – Using fewer vendors to provide packaging items means more product ships from each vendor, lowering per-unit freight costs.

3. Stronger vendor relationships – As procurement quantities and vendor loyalties increase, formerly transactional relationships can be transformed into partnerships. This can lead to access to additional resources, technical services, and more valuable face-to-face contacts.

4. Fewer invoices – Larger quantities and/or fewer purchases mean fewer invoices to process. This may have a positive impact on payment terms and even total business cost: Adobe estimates a cost of $15 to $40 per invoice to process a single purchase order.

5. Reduced inventory-related costs – Vendor consolidation should also include inventory management services, which can be just-in-time delivery or customer-owned inventory arrangements that free up working capital and space for growth.

6. Improved quality, service and regulatory compliance – Consolidating vendors makes it easier to monitor vendor quality and service to ensure packaging quality, packaging manufacturing processes, supplier monitoring, and product traceability. This is especially critical for digestible food product manufacturers subject to good manufacturing practices (GMP), an integral component of safe quality foods (SQF) compliance and quality standards like ISO.

7. Improved throughput – The best packaging vendors optimize packaging to increase throughput.

8. Improved operational efficiency – Fewer suppliers means fewer shipments to receive and store because inventory is managed to specific needs.

9. Do more with fewer resources – Vendor consolidation may have a positive impact on labor costs. As processes are streamlined, the best supplier partners can absorb activities otherwise required by the manufacturer’s team.

10. Single point of contact – Working with a consolidated team means a company has to spend less time sourcing, testing, and managing packaging, and communicating with vendors. Fewer channels of communication means less duplication of effort and fewer chances of misunderstanding.

Supply vendor consolidation improves the bottom line for manufacturing companies of all types

A well-executed vendor consolidation program will reduce the number of suppliers, eliminate redundant items, and result in packaging solutions that best protect, showcase, store, and transport products. Through increased economies of scale, consolidation can lower costs, improve inventory management, improve overall quality, simplify packaging and operational supply management, and even strengthen supply agreements. The following are just a few examples of how SupplyOne has used vendor consolidation to improve efficiency and reduce costs.

Meat processor improves efficiency and gains production space

A family-owned lamb and veal processor serving restaurants in a large U.S. city experienced costly vendor redundancy in both their janitorial and consumable packaging supplies, resulting in multiple inefficiencies. SupplyOne created a food packaging program that included access to a web-based e-commerce portal that helped them identify a new film and pouch vendor who offered a better product for less money.

Chemical manufacturer selling through home improvement stores

One of North America’s largest independent manufacturers of household, pool, auto, and personal care chemicals retailing through national home improvement, hardware, and pool chemical distributors was experiencing serious warehousing and purchasing efficiency challenges. With an extensive campus, seven manufacturing facilities, and two storage and distribution facilities, pressure mounted to reduce costs as each plant would requisition its own safety products multiple times per week based upon their unique needs and production schedules.

SupplyOne’s certified packaging specialists conducted a safety supplies audit and assessment to determine where savings might be realized through vendor consolidation. Their recommendations rationalized the ordering process across multiple plants and the resulting vendor consolidation reduced their overall spend by more than $54,000 annually, while resulting in better protection for their employees.

Popcorn producer consolidates vendors and achieves price protection

A maker and distributor of various flavors and styles of popcorn with retails shops in Virginia Beach, was storing product in trailers at a cost of more than $3,000 per month and was looking to consolidate vendors. They opted for SupplyOne inventory management services, which consolidated their vendors – bringing with it a 60-day price protection. The team also provided them with new equipment and design services, as well as online ordering, summary billing, and a packaging use assessment. Despite a corrugated price increase, the customer was able to maintain their costs through their 60-day price protection.

Military uniform decorations manufacturer reduces vendor count to reduce financial waste

A manufacturer of military hardware, ribbons, and uniform decorations was working with far too many suppliers and had an excess of unnecessary inventory, which created financial waste. SupplyOne recommendations reduced the customer’s vendors from seven to two. The team also introduced summary billing and replaced their packaging equipment. The result was improved inventory management, space savings, and protection from pricing volatility.

Vendor consolidation by the numbers

Vendor consolidation is an often overlooked growth strategy that can result in substantial savings. The graphic shown below illustrates how vendor consolidation, along with packaging management programs, can benefit companies of all kinds, from horticultural growers, to glass manufacturers, to food processors of all kinds. The programs reduce vendors, thereby reducing invoices. This results in direct cost savings and inventory reduction savings, as well as payment term or indirect savings that all add up to guaranteed cash flow improvements.