Easy Ways to Consolidate Vendors and Enjoy the Benefits
BY CHRISTINE TORRES
Published August 05, 2021
More isn’t always merrier in manufacturing. It can increase costs and hinder optimum efficiency. Tami Matthews and Craig Miller from Lane Supply Company in Denver, Colorado, host the #USAMfgHour chat on Twitter. Lane has provided industrial supplies for 60 years, and is parent to Finish Systems and Compressed Air Technologies. Lane discusses how to consolidate vendors and how it can help manufacturers with business goals.
When businesses reduce the number of vendors with which they work, it can reduce time spent on managing those relationships, maximize profitability, and numerous other benefits, according to Thomasnet, an industrial sourcing platform.
Matthews and Miller of Lane Supply Company started the chat by asking the group: Who’s your favorite vendor or supplier and why?
“Our favorite vendor is our favorite because they became a part of our team. They communicate, provide support, guidance, and they're genuinely helpful throughout the process,” said Mike Womack of NJMEP.org.
“I think it's our marketing product vendor, though I might be a little biased,” said Rebecca Hart of Drive Source International/Dynamatic in Wisconsin.
“Our breakroom snack vendor,” said Graphic Products.
“This is hard, but we have a very good IT Vendor. Even though we're a technology company we need a second set of eyes to make sure our networks run smoothly,” said Kirsten Austin of DCSC Inc. in Missouri.
“Starting out with the tough one! Ours is our PPE vendor. We can't have compliant clean room without them, and they've done an amazing job to ensure we are stocked up,” said Kelley Pernicone of North American Coating Laboratories in Ohio.
“My vendor of choice is an old friend that is always available for a coffee and catch up. We regularly help each other with leads and technical solutions. Good man,” said Nigel T. Paker of PelaTis Online in the United Kingdom.
“The one that sends me gift baskets every Christmas,” said JD at Cleveland Deburring in Ohio.
“We have a great marketing vendor, that I love. They are knowledgeable and efficient. They really go above and beyond for us,” said Jeanette Stevens of GENEDGE in Virginia.
“I like suppliers that can support a strategic direction,” said Phil Samuels of Intuilize in Illinois.
“Our favorite vendor stores catalogs for us and brings them right over when we need them. Space is at a premium for us. Solves a problem,” said Janice McKee of Burger and Brown Engineering in Missouri.
“Our favorite is our printer/swag vendors-there ae multiple ones and they are great to work with,” said Julie Basello of Radwell International in New Jersey.
“Our favorite vendors are knowledgeable, flexible, and focused on solutions … like us.,” said Lane Supply. “We also value vendors who understand our business. (It’s important to our biz.) And that’s our take when thinking about the vendor management process.”
Confession time: How many vendors or suppliers do you have?
“A lot. However, for various things ~ Banking, Office Supplies, IT, Marketing etc.,” said DCSC.
“We're excited to see what people are saying in this question! Since we're trainers and consultants, we're in this same space. We have a lot of suppliers that provide unique services. Also, we try to work with as many NJ businesses as possible, so we share the business,” said NJMEP.
“That is such a great question and I'm so glad you asked ... (stalls to go through the list). Quite a few. An exact number is not known (at least by me, the lonesome marketer, I have 6),” said NACL.
“We are just listening in more on this chat as we don't have much to offer about our vendor insight. Good information to learn though,” said Shannon Simpson of DuraTech Industries in Wisconsin.
“We have quite a few vendors due to our offerings and resources. They are all essential to helping us, help manufacturers in Virginia,” said GENEDGE.
“As a consultant, I still need help. I am a marketing strategy guide, so I often look to help map out plans and strategies, and then go to find the experts to help execute. So, I probably will work with about 5 or 6 core people including bookkeeper, asst.,” said Gail Robertson of Gail NOW in Canada.
“I have no idea. Data Analytics is a startup, and I joined in March. Pretty focused on the customer side, but we recently engaged a marketing consultant, and we are off to a good start. First project was analysis of a SAAS company that serves a similar customer base,” said Samuels.
“Our vendors are all known to us personally as they are our work teams on projects. their specialism is called on for different projects. I get pulled into their projects as well. Outside are mostly anonymous service providers such as hosting and utilities,” said Packer.
“A couple dozen- there’s so many great businesses that help us deliver to our clients,” said Dave Meyer of BizzyWeb in Minnesota.
“Two main ones that we use monthly,” said JD Allen of Cleveland Deburring in Ohio.
“We have 1. The one who supplies our swags and other personalized items,” said VirtuDesk in Washington.
“We have another one. The one who provides office supplies for our in-house employees,” said Pavel Stepanov of VirtuDesk.
“It can be unwieldy! As an example, Forbes indicates Walmart has 100k+ suppliers,” said Lane Supply. “Supply chain can be an issue & why people want to multi-source. Sure, having a couple of sources can help. But don’t overlook vendors who can handle alternate sources *for* you (distributors). You don’t need multiple vendors for the same thing. It compromises buying power, freight, relationships, and your time.”
How are your vendors helping your business?
“Being consultative, supportive of our business and willing to help us as we grow are all key ways vendors help our business,” said Radwell.
“They provide essential services/products that keep our business moving forward,” said Cleveland Deburring.
“Good vendors are hard to find,” said Sam Gupta of ElevatIQ in New York. “Some of our vendors go out of their way to check the fine prints that we would miss and save a lot of hassle and penalties. They are far more valuable than customers and employees as they bring more business through referrals.”
“Good Vendors provide products and services, great vendors provide industry trends and information not readily available to guide our choices,” said Samuels.
“Our vendors help us in many different ways. For example, our marketing vendor (I work closely with them) assists us with our CMS, analytics and more,” said GENEDGE.
“They are a huge help in determining what is happening in the market. Leveraging their knowledge tells us if something is a flash in the pan or if something has the potential to be a major trend,” said NACL. “They also keep us stocked up! Can't forget that!”
“They promote our brand. They provide us with what we need daily. They keep us open!” said DSI/Dynamatic.
“Our CEO is laser focused on vendor relationships - to help with services first, but also referrals to potential clients to us and referrals for other vendors,” said Erin Courtenay of Earthling Interactive in Wisconsin.
“For the companies I have worked for, the suppliers added capabilities and insight we did not have. Some of them are frankly more willing to take risks to push technology a bit further than they might have had before. They are a big part of risk management,” said Bill Garland, a business professional in New Mexico.
“They become your brand advocates. They can produce high-quality leads for you,” said Stepanov.
“Aside from supplying your business needs, they can help in spreading the word of mouth about your products and services. This will get you referrals and clients in the future,” said VirtuDesk.
“Knowing how vendors are helping your business is the first step. In fact, you should have a vendor strategy for how you’re seeking out vendors to help your business,” said Lane Supply. “By knowing who’s important, you’ll spend more time on them. (Spending time with the right vendors is a theme.) Don’t forget your whole business: finance, IT, etc. One dept. may be doing business w/o another department knowing. Consider value, ethics, business, and values (aligning to yours), whether they’re customers, product and service quality, availability, shipping, *their* threats (climate, supply chain), etc. Be intentional about your suppliers. The more vendors align w/ your business, while providing something you can’t do or get easily, the better.”
Do you onboard and manage them? If so, what’s that process?
“I only manage one vendor (the marketing vendor). I vetted a few, reviewed price and quality, and spoke with each one individually. Here, each dept. manages its own vendors,” said DSI/Dynamatic.
“We do! We have a process in place depending on the type of vendor,” said NJMEP. “I don't have the space to break down each process, but it's largely based on clearly explaining our needs, expectations, & taking time to learn the vendor's capabilities, flexibility, and capacity.”
“Vetting is important,” said NACL. “In business development, we are not afraid to throw out the term ‘vibe check.’ How are we feeling about the person/team we're bringing in as a vendor?”
“It is complicated at times,” said Garland. “My most recent examples supported defense programs, and I am not at liberty to disclose the process. How they answer the RFQ, what they have done in the past and how they handle failure are big factors. On-site visits are a must.”
“Our founder does. He isn’t looking to spend money unless it addresses a business need. He is excellent at articulating our requirements,” said Samuels.
“I can speak to marketing vendors. They get vetted! First, we do our homework, check reviews, and then chat with them to ensure it’s a good fit. Then we check progress as we go,” said NACL.
“That's a great question! TBH sometimes I personally fail to manage vendors appropriately out of fear of damaging the relationship or quality of service,” said Earthling Interactive.
“Yes, there is an onboarding process. It consists mostly of getting them acclimated with our company, our needs and setting up a timeline/schedule for getting things done,” said GENEDGE.
“I delegated this task to a team that will be managing them for me,” said Stepanov.
“Have a process for onboarding and managing (and even offboarding!),” said Lane Supply. “That way, you’re saving money and time. Lots of vendors? Automate your process. Save relationship building for vendors who are *really* valuable. Yes, supply chain! Build relationships w/ vendors important to your product/service delivery. Start with onboarding if you haven’t already. Use values, business alignment, etc.”
What are the other benefits of consolidating vendors (other than time)?
“Monetary savings - Fewer places/people to monitor,” said DSI/Dynamatic.
“Brain space! Sometimes keeping many vendors swimming around is detrimental, especially when you have limited time! Also, consolidation can also sometimes mean discounts! Like when you bundle home and auto insurance,” said NACL.
“Better pricing usually comes with becoming a bigger account to a vendor,” said Cleveland Deburring.
“With fewer relationships to manage you receive more value from the ones you do have. You also reduce redundancy and duplication of effort which can sometimes cause costly conflict,” said Earthling Interactive.
“Improved volume that may allow deeper discounts or favored delivery in times like this. A potential strategic resource for development of new products and ideas,” said Samuels.
“More savings,” said Stepanov.
“Time is a big factor,” said Lane Supply. “Think about everyone who interacts or is impacted by your vendor: finance, IT, operations, etc. The Hackett Group estimates $918 - $1,835 of internal costs to manage each supplier. Per year!”
Lane then went on to say that companies can also reduce risk.
“Vendors should be reliable (financially, delivery, quality) to meet your customers’ demands,” Lane said. “Eliminate those vendors who aren’t reliable or meeting your needs. Reduce costs! Fewer employees are spending time with vendors, including those less important. Plus, fewer vendors equal more bargaining power for lower prices and pre-paid freight. Savings! Get a vendor who gets you. Your vendors should care as much about your business as you do. Reduce more costs even! When your vendor understands your biz, they’re gaining efficiencies. Vendors should improve your products and services. They should save you time, hassle, and cost. Really good vendors will refer you to others to help your business. Again, it’s about really helping your business.”
Have you looked at consolidating vendors? If so, what’s your process for consolidation?
“For a startup, I suggested they partner with a company that could not only produce the components but assemble them as well. Core technology and final testing would still be in house. They could aggressively expand without the challenge of hiring more people,” said Garland.
“I can't consolidate with one vendor, but I see the benefits! Perhaps there are opportunities around our company,” said DSI/Dynamatic.
“As a startup, we haven’t faced that (yet), but since a lot of activity is project based at this time, vendors are fungible,” said Samuels. “Not strategic alliances yet.”
“I'll be honest, we haven't done too much to consolidate vendors,” said NACL. “I'm interested to see the steps others have taken though!”
“Oh yea! 2022 planning in full swing. Consolidating, notifying, and (unfortunately) removing some due to performance,” said John Buglino of Optessa in California.
“That has not come up as an option yet, but this is great information,” said GENEDGE.
“So far we don't have as many vendors. But we are always looking for saving opportunities when we talk to vendors if they might have their offerings in other countries or for other business units, etc. to take advantage of consolidation,” said Gupta.
“The process for consolidating vendors can start w/ eliminating bad ones - vendors who don't deliver quality, on time, on budget, etc.,” said Lane Supply. “Eliminate duplication where it’s unnecessary. Put the vendors you really love (they get you, you need them, they do more, they save money) at the top. Keep them. Call them and indicate you’re consolidating. Use that process as leverage for better pricing or value. Review who’s left. Are the vendors left meeting your needs? Do they understand your biz? Are they redundant? You can still negotiate better pricing/value. If they won’t negotiate price, use your values and business alignment to determine who stays. Come up with a better vendor selection process so you don’t have too many vendors ever again. Also, identify an offboarding process to get bad vendors out. Measure your cost and time savings. Revel in it. Share that info with executives.”
Anyone who champions U.S. manufacturing can join in on a new conversation each week on Twitter using the hashtag #USAMfgHour. The chat starts at 11 a.m. Pacific Standard Time/2 p.m. Eastern. Share positive blog posts, helpful articles, news, important information, accomplishments, events, and more with other manufacturers and supporters from throughout the country.