The Procurement Glossary » Supplier Consolidation

Supplier Consolidation

Suppliers & Vendors

Definition

Reducing the number of suppliers in a category by concentrating spend with fewer, better-managed vendors.

Explanation

Consolidation lifts volume leverage, simplifies management and improves consistency, at the cost of higher dependency. It is a common tail-spend and category strategy, balanced with resilience needs like dual sourcing for critical items.

Example

Consolidating twelve MRO vendors to three cuts prices 9% and slashes invoice volume.

Related terms

• Supplier Rationalization — The structured review and reduction of a supplier base to eliminate redundant, dormant or underperforming vendors.
• Supplier Base — The full set of suppliers an organisation actively buys from.
• Leverage — The relative bargaining power a buyer or supplier holds in a negotiation, driven by factors like volume, alternatives and switching cost.
• Tail Spend — The large number of low-value transactions and suppliers that together make up a small share of total spend but a big share of effort.

Related concepts

• Tail Spend Management — Bringing the long tail of small, fragmented, low-value purchases under control through visibility, consolidation and catalog-driven self-service.

Learn more

• Vendor Consolidation Guide

Frequently Asked Questions

What is Supplier Consolidation?

Reducing the number of suppliers in a category by concentrating spend with fewer, better-managed vendors. Consolidation lifts volume leverage, simplifies management and improves consistency, at the cost of higher dependency. It is a common tail-spend and category strategy, balanced with resilience needs like dual sourcing for critical items.

Can you give an example of Supplier Consolidation?

Consolidating twelve MRO vendors to three cuts prices 9% and slashes invoice volume.

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