Vendor consolidation for retailers

by | May 10, 2018

Retailers who are looking to streamline their operations and improve their efficiency, while maintaining their product selection, will often consider vendor consolidation as a way to achieve their desired results. They look for a way to reduce their numbers of vendors — especially smaller vendors with limited product lines — by finding bigger ones that can meet more of their needs.

A retailer may consider vendor consolidation because they don’t want to have to deal with as many suppliers, so they find crossover where they can get their products from a single source. So instead of buying two items from two separate vendors, they’ll get both items from one single vendor. That cuts the amount of paperwork they need to do in half and reduce their ordering inefficiencies.

It also helps them eliminate problem vendors that, say, deliver late or aren’t EDI compliant. Rather than babysitting several not-quite-there vendors, dealing with the headaches that come from processing paperwork and transactions that don’t quite meet their expectations, they’ll work with one supplier that can give them exactly what they need, even EDI compliance. This improves their overall efficiency and ensures their profit margin stays at the optimal level.

This is so important to retailers that they will drop a vendor and eliminate the product from their product line if the vendor is too difficult to work with. (Of course, with our Retail Network, they can easily find another who will comply with their EDI requirements and product requirements.)

Finally, retailers can consolidate their vendors through programs that work like miniature networks. In some cases 3PLs and vendors are already consolidating their shipments, especially when they’re going to the same retail partners in the same region (e.g., two electronics manufacturers both shipping non-competing products to Best Buy stores in the Upper Midwest).

So retailers can see some of the same benefits by asking their trading partners to consolidate as a way to reduce shipping costs, schedule deliveries for greater efficiency (offloading one large truck instead of several small ones), and shorter transit times for all items.

Finally, some consolidations are involuntary, such as during mergers and acquisitions between suppliers. The retailer has no control over those mergers, but they often end up benefiting anyway, as they’re now dealing with one larger vendor handling more items, reducing their paperwork, improving shipping, and reducing any ordering inefficiencies.

SPS Commerce’s sourcing solutions can help retailers identify vendors with products, services, and capabilities the retailer wants. Additionally, EDI can help retailers manage the paperwork, transactions, and relationships better than when they were using an old fax-and-email system, and hand entering all order information. And an improved EDI system can help reduce the need for drastic vendor consolidation just by making everything easier in the interim.

To learn more about vendor consolidation and improving ordering efficiencies, please visit the SPS website for more information. There, you can speak to one of our vendor network or EDI experts and get all of your efficiency questions answered.

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Brian Ruud

Brian Ruud

Manager, Integration Center of Excellence at SPS Commerce
Brian Ruud is currently the Manager of the Integration Center of Excellence at SPS Commerce. Brian graduated with his MBA from Hamline University in 2011 and has been in a management role at SPS Commerce for 5 years. Brian's area of expertise lies within retail, specifically EDI, fulfillment, onboarding/testing, change management and compliance. Brian's team is responsible for providing guidance, direction and education for all change management events that impact SPS integrated customers (Suppliers, Retailers, and 3PL Providers).
Brian Ruud

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