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Category: Business and Industry
Date Submitted: 08/03/2015 08:04 PM
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Procurement Executive Insight
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The Benefits of Supplier Consolidation
Extend Far Beyond Sourcing Savings
By Pierre Mitchell and Christopher Sawchuk
Executive Summary
Consolidating suppliers within specific supply markets is a proven strategy to concentrate buying power and reduce
purchase prices. The activity can be taken further, though, especially within non-production (indirect) spending areas.
By simplifying and automating interactions with preferred suppliers, procurement can more effectively work these
relationships beyond just cost savings, to include support for more strategic enterprise imperatives regarding sustainability, innovation, risk reduction, diversity, localization and other key objectives. As hard-dollar savings become ever
more challenging to squeeze from traditional product sourcing, harnessing these broader benefits is where the greatest opportunity to gain competitive advantage will be found.
About this research
The Benefits of Supplier Consolidation
Based on over 10 years
of data from The Hackett
Group’s procurement
benchmark database, this
research is intended to
help executives create a
multi-pronged business
case for supplier consolidation.
Today’s global business environment is increasingly complex. Over time, this complexity
costs money. For example, as more goods and services are sourced to third parties,
companies invariably end up buying too many things from too many different suppliers.
The resultant supply-base complexity adds cost on many fronts. Understanding the types
and costs of such complexity is important in order to identify and eliminate the causes of
waste, expense and risk.
To make the results applicable across multiple
industries, we included
only indirect spending in our analysis (i.e.,
spending on goods and
services that are not
directly included in the
goods and services that
the company sells to its
customers) ....