Benefits of consolidating vendors
After all, reducing prices doesn't work if it means you must hold inventory for longer periods; in this case, your company's savings will be eroded by high carrying costs.Ultimately, what’s required is the willingness to focus on the following five benefits.Benefits of Vendor Consolidation Vendor consolidation talks about the act of only using a single vendor to assist lower the requirement of speaking to several vendors for products.While certain companies prefer having multiple vendors for every product category that they buy, vendor consolidation offers financial and operational benefits that cannot be overlooked.Risk can be categorized in four ways: A well-constructed, consolidated vendor management program can not only reduce risk letting you focus on fewer trusted partners, but increase net profits, improve contract terms, reduce costs from audits and encourage better performance from vendors.Lack of this control could lead to a hit on your reputation and even significant fines and other penalties.
Ultimately, this translates to a higher return on your investment, and more money in your pocket.
Relying on vendors is not without risks – the one thing you can’t outsource is risk.
Ultimately, you will be held responsible for anything done by a third-party on your behalf.
Legally, each agency of the Federal Financial Institutions Examination Council (FFIEC) – OCC, FDIC, FRB and NCUA – has issued rules requiring financial institutions to tighten their management of third-party vendors critical to their operations.
“Critical to operations” includes anything that might affect a loan, an ability to meet a consumer law, your brand or reputation or your ability to defend against cyber-attacks, just to name a few.
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Does your Procurement Department fail to understand the benefits of vendor consolidation? It’s something many companies deal with, and it can be quite frustrating.