Buyers always find that having too many suppliers can cause problems. It leads to more administration and complex relationships, which can have severe consequences for the company as a whole. So supplier consolidation offers a solution. In this article, I’ll explain what it is, and how it works to simplify your supplier network.
What does it mean to consolidate suppliers?
Supplier consolidation, also known as vendor consolidation, involves reducing the number of suppliers that buyers engage with to a few or even a single partner. This means that the quantity and variety of items you purchase remain the same, but you obtain them from a limited number of strategic suppliers. For example, if you previously sourced 10,000 pet toys in different categories from 10 suppliers, with supplier consolidation, you would only need to purchase from 2-3 suppliers.
Benefits of supplier consolidation
The main objectives of supplier consolidation are to streamline and simplify the supply chain. When there are too many suppliers, it burdens the management. Consolidation allows buyers to focus on the most successful suppliers within the same supply market, making supplier management and communication easier. It helps improve operational efficiency and reduces delivery times.
Supplier consolidation also helps save costs, as buyers can concentrate their efforts on negotiating with suppliers for better prices or terms. After long-term collaboration and bulk orders, buyers may even obtain volume discounts.
By consolidating, buyers can have better control over quality standards, ensuring consistency in products or services. They can closely monitor and evaluate supplier performance, such as on-time delivery and product satisfaction. In a close partnership, buyers can provide feedback, implement improvement measures, and drive better supplier performance.
Key Steps for Effective supplier consolidation
Evaluate current suppliers
It’s important to conduct a comprehensive evaluation of your current supplier base. You can do this by considering the following questions:
How many suppliers are you currently working with? Where are they located?
This helps determine if you have too many suppliers, which leads to excessive communication costs. It also considers whether they are located within industrial clusters. Industrial clusters often have advantages such as a dense supply chain, technological innovation, and lower costs, as well as convenient logistics and transportation.
What products do you purchase from each supplier? What are the quantities and prices? How about their respective delivery times?
For vendors you’re only sourcing a few products from, can others who you source more from replace them?
This aspect helps assess the suppliers’ production capabilities, technical expertise, and delivery punctuality. It also investigates whether different products can be consolidated with a single supplier, saving on logistics time and costs.
Have you had negative experiences with any vendor that has resulted in increased costs?
Which vendors are easiest to work with?
This assesses the cooperative and collaborative abilities of your suppliers. It also considers their responsiveness to your demands, particularly in the new product development process.
By considering these questions, it can help buyers determine which suppliers are most suitable for integration when referring to the supplier’s capabilities, sustainability, supply chain coordination, and technological innovation capabilities. Then buyers can ensure that the integrated supply chain can meet long-term strategic goals and requirements.
Determine consolidation goals
Once you’ve assessed your current situation, you need to define your objectives. And the goals depend on individual requirements.
For example, an Amazon seller in the US imports leather shoes, sports shoes, and casual shoes in different styles from 3 suppliers in China. Now he finds it takes a lot of time and energy to communicate with every supplier, and the shipping time is confusing. So his goal is to leave 1 reliable supplier to improve efficiency in communication and shipping.
Develop a consolidation strategy
There are several different ways to approach supplier consolidation.
One common way is consolidating reliable suppliers into a single contract. It can help simplify the procurement process and reduce costs. Another approach is to consolidate suppliers into regional or global hubs, like integrating China shoe suppliers in Guangdong or China clothing suppliers in Zhejiang. It can improve quality and lead time as well as reduce costs.
Implement and monitor the results
After determining the strategy, you can start by placing a small order to observe its feasibility. If any problems arise during the process, adjust promptly until you achieve the desired result.
Jingsourcing empowers you to get diverse supplier solutions
You may find the whole consolidation process complex and energy-consuming, so it is a good idea to ask Jingsourcing for help. We are located in Yiwu, an industrial hub that clusters many factories and owns China’s biggest wholesale market. Our advantages are
Rich supplier resources
We have cooperated with 200+ manufacturers of different sizes who are all located in China’s industrial cities, and they passed our strict factory audit. Each of them has specialized product areas and performs well in production efficiency.
If you have demands, we can quickly integrate the suppliers and assess which one is best suited for your desired product. By leveraging our connections within industrial clusters, we can stand in your shoes to communicate with factories and offer you competitive pricing.
Experienced in sourcing and customization
We source over 100 different kinds of consumer products every day, ranging from household to electronics to hardware. And we are also experienced in customization. Our team has a deep understanding of the industry and product trends, allowing us to offer valuable insights and suggestions for customizing your products.
Whether you require OEM manufacturing, private labeling, or unique product designs, we can guide you through the process and ensure that your specifications are met.
One-stop service
With our extensive industry knowledge and expertise, we can handle the entire sourcing process, from finding suppliers to delivering products. You only need to perform two tasks: inspecting the samples and receiving the final shipment. We will handle the production or modification of the samples entirely based on your requirements.
After the final sample is confirmed, we will also oversee bulk production to ensure that the quality of the final products matches that of the samples. When the production is completed, we can also implement flexible quality inspections. Our team not only provides standard AQL sampling inspections like third-party inspection companies but also go the extra mile.
We conduct a higher percentage of product checks and communicate with you to understand your specific focus areas. We send videos of inspected items, allowing you to assess and determine whether any identified defects are acceptable. Additionally, we offer 1-by-1 inspections to minimize the defect rate to zero, which is not typically provided by third-party inspection companies.
To sum up, we offer comprehensive one-stop China procurement services, specifically catering to clients with significant requirements for China sourcing supply chains.
Two further asked questions.
What does consolidated supply mean?
“Consolidate supply” involves integrating and optimizing the entire supply chain, making things simpler, more cost-effective, and more efficient. This typically includes consolidating your base of suppliers/vendors into a smaller group, consolidating goods from different suppliers to streamline shipping and reduce transportation costs, and managing inventory from various locations in fewer warehouses, etc.
What is consolidation in the supply chain?
Consolidation in the supply chain is essentially the concept of ‘consolidate supply’ we discussed earlier.
That means to optimize and streamline various aspects of the supply chain. Commonly, it involves consolidating product suppliers and shipments, working with logistics providers, managing warehouses, and utilizing a unified information system to manage orders, inventory, delivery information, etc., so as to enhance order fulfillment speed and accuracy, thereby improving customer satisfaction.
