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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) ....