The Costly Trap of Multiple Vendors

When it comes to manufacturing, a continuous flow of products, supplies, and materials is imperative. In order to meet a target KPI (key performance indicator), a purchasing manager may submit the same inquiry to different vendors—after all, who doesn’t love a good deal? While utilizing multiple vendors for competitive pricing seems like a good idea, there’s always a hidden cost.

At first, using multiple vendors may seem like an obvious choice. For essential materials that cannot be produced in-house, companies tend to buy from multiple vendors as a cost-saving measure. However, the time and resources spent on managing a variety of supply chains stacks up. This results in a loss of value that made those cost-savings so attractive in the first place.

A Common Oversight

The daunting task of ordering goods contains moving parts, which a purchasing manager typically handles. First they need to check product availability; then submit an inquiry, bargain for a lower price, approve the purchase, submit the purchase order, and track the shipment (which could be days or weeks). When the shipment arrives, it then needs to be processed and taken to its destination where it is finally turned into profit.

Now multiply this process by different vendors and distributors. Multiple vendors are time consuming, costly, but all-too common.

Let’s examine a real-life company in a former multi-vendor trap—the Xerox Corporation. In the 1980’s and 1990’s, Xerox utilized thousands of suppliers for their material needs. For the same reasons, Xerox decided to downsize their suppliers.

What’s their current supply base? Four strategic suppliers that account for about 60%-70% of their production component and material purchases. For a multinational company with over 131,000 employees, that’s some major vendor consolidation—and it works.

Focus on One Quality Distributor

While it may seem like a good idea to shop from multiple vendors, you should consider the advantages of one high quality distributor. With a single source distributor, you can save your employees time from learning different tools, speaking with various reps for the same product, and alternating between vendors for different supplies.

The major benefits of a single distributor includes shipment consolidation, increased discount potential, better supply responsiveness, and transparency. Not only is a series of repetitive steps immediately eliminated, there’s also a sense of accountability if anything goes wrong.

Working with a distributor who has experience with your company means they can cater to your needs better. They can consolidate your goods and easily identify any potential issues down the road that may affect you. What if a vendor doesn’t have a good you need? Most distributors have bargaining power and established business relationships that can negotiate on the behalf of a valued customer (i.e. you).

By using a single distributor, your company will save time, money, and resources to obtain the exact same goods.