Unless you CONSOLIDATE!
Often times in the world of business to business selling, sales reps have a tendency to walk into your office or call you on the phone and attempt to begin a pitch about how much money they can save you on a particular product or service. As a purchaser (whether you are the owner, manager, or purchasing agent) your responses are probably automated to a handful of vague statements such as; “I’m happy with my current vendor.” “I’m not interested.” And my personal favorite, “I don’t have time to look at new vendors right now.” Occasionally I was caught off guard with this amazing and intriguing statement: “I can’t afford to buy everything from one person. I have to shop around for the best deal, so don’t waste your time with me.” WHAT?! Interestingly enough, I heard this from both large and small organization.
Smart and experienced business people understand that time is money, and sometimes saving time is better than saving money. Additionally, saving time can help you make more money in other areas of your business. In the grand scheme of things, office supplies are a very small part of your business. That is, until you run out of something. Who wants to stop what they are doing to go to the store and buy a box of paper or search through a mountain of boxes (albeit skillfully marketed) to find the right ink cartridge? Not me, and hopefully not you. This is where having a vendor partner comes in handy.
Over the last 10-15 years we have heard a lot of chatter about vendor consolidation in the procurement world. Is it good? Is it bad? Who cares where I purchase my materials and supplies? After researching this topic and being trained by the world’s best salesmen and procurement specialist, I’ve narrowed it down to 3 specific and simple benefits that could impact your business right now.
- Purchase Cost Savings and Containment (also referred to as “Hard Cost”):
This is the simplest and most immediate of all the benefits. When you reduce your number of vendors, your purchasing power goes up. When you increase your number of vendors, your purchasing power goes down. By reducing the vendor pool and committing the total spend to a few well qualified and thoroughly vetted suppliers, purchasers can leverage their increased buying power to negotiate lower pricing per unit. A welcomed side effect is that typically the total landed cost (i.e. product plus shipping and handling) is also reduced. Additionally, cost containment is realized because suppliers are more willing to hold your negotiated pricing structure for longer periods of time.
- Process Cost Savings (also referred to as “Soft Cost”):
Again, this is simple and immediate; Time is Money! When the vendor pool is reduced, by default the number of transactions go down. In other words; fewer invoices, fewer checks to cut, fewer donut bearing sales reps to talk to, fewer delivery drivers putting clip boards in your face and fewer employees managing the purchasing process. In a 2012 study by the Hackett Group, they discovered that the internal cost for a purchase transaction for companies with top-performing procurement organizations was less than $9 compared to nearly $24 per transaction for the rest of the peer group that was studied.
Whether you are in sales, procurement or management, you probably hear a lot about customer loyalty. You may even have customer loyalty programs within you own company. However, what you don’t hear much about is vendor loyalty. Think about it. When you have the right relationship with the right suppliers then it becomes more of a partnership. Loyal vendors have a vested interest in making sure your company is successful and profitable even though they only impact a certain portion of the business. Loyal vendors also tend to be more swift, agile and flexible. When you have an emergency, they spring into action. When you need it fast, they find a way. When you have a need that is outside of the norm, they go the extra mile to source and supply what you need. When you have the right relationship with the right vendors, they become an invaluable resource to your business!
Simply put, you can’t afford not consolidate to a total solution provider (such as Butler Business Products – HINT! HINT!) Think about it; you don’t have time to clip coupons and cross shop big box retail suppliers and you should not be paying an employee to do it either. You have a business to run. The right vendor relationship means you’ll always have what you need to run your business like a well-oiled machine!
The entire Hackett Group study can be found here.