Today’s global business environment is increasingly complex. Complexity costs on the bottom line. Supplier consolidation can be an effective Facility Management strategy to reduce costs while improving efficiency. Here’s how it works.
In its simple terms supplier consolidation means reducing the number of suppliers within a supply market i.e. Facility Management. As a strategy to improve supply chain effectiveness, supplier consolidation in Facility Management has increased in popularity over the last decade. This clearly reflects in the rise of demand for integrated facility management.
There are many good reasons why this strategy is popular.
Supply-chain complexity adds costs on many fronts. When collaborating with multiple service suppliers for example a catering supplier, a security supplier or a cleaning supplier independently many resources are spent on middle management including supplier administration and coordination.
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Alike your service procurement costs and purchasing power may not be optimal due to the limited size of your purchase.
Besides reducing the complexity in the supply chain, supplier consolidation in Facility Management holds multiple other benefits:
- Reduced supplier management costs: when reducing the number of FM suppliers, middle management costs decrease as less time is spent on supplier meetings, negotiations and transaction management.
- Increase in purchasing power: as the number of suppliers is reduced the buying power automatically increases. Lowered purchase price due to larger contract size generally represents the largest source of hard-dollar saving opportunity.
- Improvement in compliance: in terms of effectiveness-related benefits from supplier consolidation (beyond cost savings), improved compliance ranks among the largest. Studies show that companies can save up to 1-2% of spending when collaborating with engaged suppliers that have capable processes/systems and are comfortable performing transparently against service level agreements.
- Stronger supplier relationships: Managing fewer suppliers frees up time to focus on building relationships with core suppliers, manage expectations and align strategic visions. Vested outsourcing relationships are great examples of that.
- Global consistency: the lower the number of suppliers used globally, the easier it is to make sure that the service delivery and quality is consistent cross sites and that same processes and procedures are followed accordingly. From a brand perspective consistency can minimize risks and better manage end-user expectations to the service delivered.
Integrated Facility Services is built on the benefits of supplier consolidation
Choosing Integrated Facility Services as an outsourcing solution, the facility management provider will manage all associated service deliveries and bear the responsibility of e.g. employee management, employee training as well as service innovation.
By reducing the number of subcontractors, an Integrated Facility Service solution helps to reduce a company’s fixed costs while at the same time improve organisational flexibility and service quality.