Supplier consolidation

Supplier consolidation reduces the number of suppliers a business uses for a category or requirement. It can simplify administration and strengthen purchasing power, but may increase dependence on the remaining suppliers.

Consolidation may combine fragmented purchases with fewer preferred suppliers, reducing duplicated administration and improving negotiating leverage. It can also remove useful alternatives or concentrate exposure to one factory, region or transport route. The decision therefore involves supply resilience and capability as well as the size of the proposed discount.

For example, a retailer could move packaging purchases from six vendors to two qualified suppliers. That simplifies management without creating a single source for every item. Dual sourcing preserves an alternative where necessary; single sourcing places a particular requirement with only one chosen supplier.