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5 Reasons Vendor Consolidation Might Be Right for You

Feb 08 2016

 

Your technology. Your office equipment. Your cleaning supplies. Your paper products. Even your snacks.

Healthcare clinics can become inundated with the process of managing multiple vendors that each service only one specific need. Increasingly, they are finding that the best solution is to consolidate vendors.

Here’s a succinct definition of the practice, from the article The Incredible Benefits of Vendor Consolidation: “Vendor consolidation is a procurement practice that involves lowering the number of vendors your company buys from. Instead of spreading out your spend across many vendors, you focus your spend on a limited number of select vendors.”

Here are some of the benefits your practice can realize by consolidating vendors:

1. Vendor consolidation saves time

Smaller healthcare facilities constantly do more with less, and that includes time. Managing vendors can cost your practice precious hours: When is the shipment arriving? Is someone available to meet the vendor? Didn’t we just order more cleaning supplies? Whose bill haven’t I paid?

One study found that each supplier can cost a company between $700 to $1,400 in internal costs, which includes all the activities associated with managing the vendor, such as ordering, overseeing billing systems and coordinating deliveries. Fewer suppliers can reduce those time costs.

2. Vendor consolidation saves money

In addition to the indirect costs of saving staff time, you’ll typically see a hard cost savings from the economies of scale that occur when fewer vendors provide more.

“A fundamental financial advantage of consolidating vendors is that it drives down the per-unit prices,” says Richard Lopez del Rincon, senior vice president of consulting firm Intermedix. From volume discounts to lower delivery fees, your cost savings are likely to spring from numerous directions.

3. It makes system management easier

These days, most vendors have their own dashboards for ordering and tracking, varying procedures for support desks, proprietary terms for returns, different payment schedules and other processes that can add up to an administrative headache.

“Reducing the number of vendors often means fewer systems, which requires less training, improves proficiency and increases efficiency,” Lopez del Rincon says.

4. You’ll forge stronger relationships

Developing a level of trust with vendors can take time, so the fewer affiliations you have to manage, the easier it is to cultivate a true partnership. When you establish a higher level of trust, the company evolves to be a partner, rather than just a supplier.

5. You’ll be more productive

The bottom line is that all these gains can be rolled into one overarching benefit: you’ll be more productive and efficient. As the article How Business Soft Cost Reductions Leads to Hard Cost Reductions describes, soft costs are real:

“There’s no space on a company’s balance sheet to track the costs of writing a check, signing the check, the time needed for approvals or the day-to-day costs of poor efficiency and redundant work processes. [But] everyone in business knows that it costs money to write a check. Everyone understands that wasting time on confusing work processes is simply wasting money."

“Consolidating to ‘one-stop-shopping’ with vendors reduces stress and saves time, and the improved quality of life can be priceless to many healthcare professionals working in a small practice,” Lopez del Rincon says.

 

Cathie Ericson is a freelance writer covering business and consumer topics. She creates branded content for Fortune 500 companies, and her work has appeared on LearnVest, Costco Magazine, Forbes, TheGlassHammer.com and IDEA Fitness. Follow her @cathieericson.

 

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