It often happens in companies that there is too large a supplier base. A large supplier base means that there is contact with many different suppliers, each with their own point of contact, invoices and payment term. Of course, that takes a lot of time and time is money, so you want to limit that as much as possible. Therefore, it can be beneficial for your organization to reduce the supplier base. What are the benefits of this? We have explained that in this blog.
Lower the TCO
A big advantage is that you can lower the TCO of your organization. TCO is an abbreviation for the Total Cost of Ownership. This is the total cost of purchasing and owning a product or service over its entire life cycle. This does not concern the costs of purchasing a product, but all the costs associated with it. So also think of the costs that are spent on training, acquisition and maintenance, for example. You can reduce these internal costs by reducing the supplier base by up to 21%.
Replace the large group of suppliers with one supplier
Costs can be saved by replacing the large group of suppliers that we currently have with a single supplier. You save a lot of time with this, because if you only have one supplier, this means that you also only have one point of contact, one invoice and therefore one payment term. Invoice management is therefore a lot more efficient and takes less time. The time you have left can therefore be spent on optimizing internal processes or you can focus on strategic issues, for example. It often happens that these things are not at the top of the agenda and are therefore not dealt with quickly.
It is of course nice to reduce costs by reducing the supplier base, but there are still many opportunities to reduce costs or save time. This can also be done, for example, by analyzing indirect procurement. There is often still a lot to do. Indirect purchasing refers to all goods that support the core activities of the organization.