Use the Magnifying Glass

How is your vision? Is it 20-20 or do you need lenses or a magnifying glass? How about your supplier and spend visibility?

In procurement, a typical strategy is to reduce your supplier database. That can lead to significant savings for your organization. However, like anything else, it is most effective if done right.

If an organization has done spend analytics, they have visibility into where the spend is and what suppliers are involved. If they have not, it makes it more difficult to know where to focus.

Setting a number of a goal for consolidation is a good practice once you are ready to do that. This is not necessarily a strategy across all categories. That depends on the particular situation with that category within that company. You can go to an extreme and have too small of a supply database. Then you are left without the appropriate source for some critical product or service. Do not let that happen.

It comes down to category strategy and also how much you want to leverage your volume on a global basis. If you go into a category that is completely new, you will consolidate very quickly.

Have you had any experience with supplier consolidation? What were the results? Did you experience good savings from the process? Did you find anything that was trimmed too far?