How Effective Vendor Consolidation Slashes Procurement Costs
Discover the strategies and tools for more effective vendor consolidation—and cut procurement costs.
As your business grows and you work with more vendors, it becomes difficult to manage relationships and keep costs down. You can find yourself spending hours negotiating contracts, staying on top of renewals, and managing communications. This leaves no time for making sure you’re actually getting the best value for your money.
Vendor consolidation lets you strategically cut down the number of vendors you work with, helping you to save time and optimize your cash flow.
In this article, we take a closer look at this approach and some key tips to help you. We also look at Vendr: a solution that lets you centralize vendor management and implement strategic procurement to streamline purchasing processes. With expert and community insights, it also helps you negotiate better deals on SaaS contracts.
Grow your business without worrying about unnecessary SaaS spend
Vendr helps you consolidate vendors and get the best price on your contracts
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What is vendor consolidation?
Vendor consolidation is the process of reducing the number of suppliers you work with through elimination or merging. For example, if a company uses three different vendors for software solutions that perform similar functions, it might look to find a single vendor that can meet all those needs.
This approach streamlines operations and simplifies vendor management. It can also help you spot opportunities for cost savings such as those where you're paying for duplicate solutions or underutilized services.
Vendor vs. supplier consolidation
Supplier consolidation and vendor consolidation are two terms often used interchangeably. However, it’s worth noting, for the most part, suppliers provide materials or components and are simply a part of the supply chain, while vendors sell finished products, like software.
As such, vendor consolidation and supplier consolidation have varying impacts on business. Supplier consolidation enhances cost control within the supply chain while vendor consolidation improves operational integration, cuts costs, and reduces management complexity.
Why you need to consolidate your SaaS vendors
If you’re scaling your business without a centralized overview of your vendors, you’re probably facing one of these situations. If so, it’s time to consolidate your SaaS vendors.
You’re missing out on cost savings
Decentralized buying, where different teams each buy various solutions, leads to unused subscriptions, too many licenses, and software that simply isn’t fit for purpose. And all of this means unnecessary costs.
When procurement teams don’t have oversight over all vendors, you could also be paying more than you need to. This is due to information silos and a lack of coordination, resulting in missed opportunities for volume discounts, better contract terms, or optimized spending.
Vendor management admin is killing your productivity
When you’re onboarding, managing payments, and communicating with dozens of different vendors, you lose hours each month. This leaves little time for finding exactly the right software solutions and negotiating the best prices.
Your vendor relationships are stretched thin
Supplier management is much more than onboarding a new supplier and communicating with them when there is an issue. But when you’re overseeing a huge network of vendors, you don’t have time for tracking performance, identifying potential risks, and managing relationships.
Important & sensitive data is scattered
When you work with multiple SaaS vendors, your data becomes fragmented across various platforms. This makes it difficult for you to remain compliant with regulations such as GDPR and ensure data security. Plus, you risk more breaches as each vendor may have different security protocols and vulnerabilities.
The benefits of vendor consolidation
By working with fewer suppliers as part of a vendor consolidation strategy, you can:
- Cut costs by spotting overlapping and underused services
- Reduce the administrative burden of managing vendors
- Gain time to focus on vendor risks, managing contracts, and properly assessing vendor performance
- Protect your data and more easily meet compliance regulations
What’s more, when you consolidate vendors and purchase more of their products or services, you become a valuable customer. This increased purchasing power allows you to negotiate discounts, volume-based pricing, or more favorable contract terms. Later, we explore how Vendr can help you do this.
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Key vendor consolidation tips for SaaS
Ready to start improving your vendor consolidation processes? Here’s how:
Evaluate existing vendors and identify redundancies
Start by performing an exhaustive evaluation of your existing SaaS vendors to understand their performance, associated costs, and overall value. You can work with Vendr's team of expert SaaS consultants to analyze your stack and consolidate.
Create a consolidation strategy with key stakeholders
To effectively consolidate vendors, involve key stakeholders from different departments and create a strategy that aligns with your organization’s short and long-term goals. Collaboration across teams ensures the consolidation process minimizes disruptions and all critical requirements are met.
Select & prioritize key vendors
After identifying potential vendors for consolidation, look at which vendors you have (or could procure) that offer the most value, reliability, and long-term benefits. Focus on those with a broad range of services, strong support systems, and the flexibility to grow with your organization.
Partner with procurement experts
Rethinking your vendor relationships often requires overhauling your procurement processes as a whole. You need a strategic and centralized approach to spot the solutions you don’t need — and build great contacts and vendor relationships in the first place.
Here’s how an expert procurement solution like Vendr can help:
- With structured approval workflows, you can prevent the number of vendors you use from escalating
- You can identify overlapping software by bringing all your software solutions into one platform
- You can manage vendor relationships by centralizing supplier management
- With centralized contract management, you can stay on top of renewals
- Negotiation support and Marketplace insights can help you get a good price at the beginning of your contract with exactly the features and seats you need
How Vendr enhances SaaS contract management
With Vendr, you can identify opportunities for cutting down your list of vendors and move toward a strategic procurement model. One where you set yourself up for success before you sign a new contract.
As Daniel Sischy, IT Manager at Mattermost says, “When you have 50 managers, it's really difficult to ensure that each person is properly negotiating on behalf of the company. Vendr allows you to take back control over your vendor relationships and cost management by setting up automated workflows for your team.”
Our industry-specific experts can provide negotiation support based on their strong relationships with vendors and insights about what other companies pay for their software. They also analyze your contracts to arm you with acceptable price ranges, commercial levers, and renewal insights. You can get bulk discounts and, at the same time, pay only for what you need.
Mattermost saved over $281,000 in two years with Vendr’s support.
Grow your business without worrying about unnecessary SaaS spend
Vendr helps you consolidate your vendors and get the best price on your contracts.
FAQs about vendor consolidation
What is consolidation in procurement?
Consolidation in procurement involves sourcing more products or services from fewer suppliers. This strategy aims to streamline business operations, enhance efficiency, reduce complexity, and boost your bottom line through better-negotiated terms and stronger supplier relationships.
What are the challenges of vendor consolidation?
Successfully navigating vendor consolidation means ensuring seamless integration and maintaining service quality. To do this, businesses must carefully assess which suppliers can meet multiple needs and work to build strong relationships with them while negotiating fair prices. Vendr can help you get a fair quote with negotiation support.
What’s the difference between vendor consolidation and vendor reconciliation?
Vendor consolidation focuses on optimizing the number of suppliers to reduce inefficiencies and improve profitability by sourcing from fewer suppliers. Vendor reconciliation, on the other hand, involves matching invoices, purchase orders, and payments to ensure accuracy and resolve discrepancies.
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