When you think about cutting costs for your small business, you probably start by examining things like cost of materials, your profit margin, reducing overhead, or other traditional cost-saving measures. In some cases, you might look at your marketing efforts, and see where you can trim back. Unfortunately, cutting costs from the marketing end of things only serves, ultimately, to reduce sales. When sales drop, so will your bottom line.
One of the best ways you can reduce costs without cutting services or slowing down your marketing efforts is by consolidating suppliers. Consolidating suppliers will not only save you money, it will also save you a lot in terms of frustration down the road.
How does consolidating suppliers help to reduce costs? Well, to begin with, when you have fewer suppliers you will, naturally, be purchasing more goods from each supplier. This is good news for you. The more you purchase from a given supplier, the more likely you are to be able to get a volume discount in terms of pricing.
There is another way that consolidating suppliers reduces costs. When you reduce the number of suppliers, the materials you work with tend to have more consistency. If you were previously buying a material from several different vendors, for example, you might have to utilize several different processes or techniques in order to get the desired result. Consolidating suppliers means you spend less on training.
Take, for example, something as simple as computers. If you have a mix of PC, Macintosh and Linux computers in your small business, it will be necessary to cross train some employees on those different computers. In some cases, you might have to have an Information Technology person just for each of a different type of computer. Going down to a single type of computer from a single vendor can reduce your staffing and training needs, thereby cutting costs.
Consolidating suppliers helps your business in another way. When you consolidate suppliers, you increase the amount of influence you have with your remaining suppliers. Because your volume has increased, you become a more important customer to your supplier. You can negotiate not only the price of your materials, but perhaps the quality or the design of those materials, as well.
Choosing which suppliers to keep and which to consolidate can be a bit challenging. You need to look at more than just cost, for example. You need to consider things like material failure rates, customer service problems, and other intangibles that, while they can’t always be measured with a raw monetary figure, nevertheless impact your small business’ bottom line.
Ultimately, consolidating suppliers reduces costs for your small business, increases the consistency of your business processes, and even increases the amount of influence you have with your suppliers. While it’s important not to put all of your proverbial eggs in one basket, consolidating suppliers down to a small number has obvious and immediate benefits to your small business.
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