The benefits of vendor consolidation and optimization are vast, but to capitalize on these you first need a strong understanding of your supplier base. Supplier analysis provides a basis for your decision-making, but with so many variables to evaluate – vendor offerings, performance indicators, quality – the process is time-consuming and just getting started may seem overwhelming.
When getting better acquainted with your vendor base, there are four areas that will help you assess and identify opportunities for efficiencies and many tools available to help you save time and money throughout the process.
When assessing your suppliers, start by identifying which related companies provide similar services within the marketplace, so you can determine who you may already be doing business to find opportunities for some cost-savings. Doing this manually could take many manhours and, even then, you might not come across all vendors within this space. To overcome this, you may want to refer to a market intelligence firm that not only has a list of all major vendors, but applicable statistics, like market share, performance, total revenue, profit margin and risk level, for each vendor within the market.
Another way to identify relevant vendors and their markets is to research a well-trusted supplier individually. By using a tool like ProcurementIQ’s Data Wizard, you can search by the supplier’s name to see all the markets in which they operate. For example, if you’re looking for ideas on how to increase your buying power with a large company like Xerox, where the only way to save money is through bundling, the Wizard would produce a list of all the industries where it operates so you can quickly identify areas for cost-savings.
The next area to analyze is each vendor’s differentiators. For example, you may have three vendors all quoting the same price and therefore need to analyze other factors before selecting one. However, you’d have to be an industry expert to know all the market nuances under consideration – something you probably don’t have the time or resources to become.
In this case, using a Buying Decision Score Card can help you quickly evaluate the differentiators critical to the product or service you’re seeking to acquire. And each factor’s weighted score will help you easily run your own customizable assessment, so you can make the smartest decision possible.
Next, look at the factors that determine the success of a particular product or service. By understanding the key quality factors, you can go about properly assessing the vendor’s capability to determine which is best suited for your needs. Once again, a market intelligence service can provide a quick analysis of quality control factors relevant to the product or service that you’re assessing.
Once you’ve done your research and identified a potential vendor, it’s time to dig in deeper and have a conversation. This will give you a chance to speak with the supplier one-on-one and ask the product- and company-specific questions you want to know. But how do you know what to ask? Unless you’re familiar with the market, it may be difficult to compile a list of hard-hitting questions that get to the key issues and mitigate your risk exposure. To quickly get up to speed, try using a market intelligence product, like ProcurementIQ's Research Reports, with a list of negotiation questions on more than 1,000 products and services.
By taking such steps and incorporating the suggested time-saving tools, you’ll have a much greater understanding of your current and potential vendors. This will provide you with the knowledge you need to consolidate, optimize and increase buying power amongst your supplier base.
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