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Supplier consolidation: the benefits and four steps to implement

18 April 2024

As the fast-evolving landscape of logistics continues to drive the need for efficiency, organisations of all sizes are looking to streamline operations in order to stay ahead. In doing so, an increasing number of manufacturing, 3PL, eCommerce and warehouse operations are moving away from sourcing from a broad spectrum of suppliers and instead, seeking a single-source solution.

THIS IS a trend that Southgate Global, a leader in the supply of equipment, consumables and servicing in operational logistics and fulfilment, has witnessed first-hand, and has configured its organisation to respond to such demand.

Operational logistics and fulfilment in particular, and specifically industrial packaging and materials handling supplies have been most prone to supplier fragmentation over the years, as historically, many suppliers were unable to meet the entire scope of an organisation’s full operational needs. 

Instead, organisations were forced into using separate suppliers for each category need, purchasing void fill from one supplier, strapping and strapping machines from another, and carts and trolleys from yet another. The market was yet to offer an alternative which responded to all picking, packing, strapping, wrapping and dispatch needs.

Now, as commercial organisations look to reduce costs by simplifying their supply chains and speeding up efficiency, supplier consolidation is becoming increasingly popular.

Dan Brasier, CEO at Southgate Global, said: “Juggling various service providers to source your packing equipment and consumables can be challenging and cause unnecessary strain on your supply chain. Not to mention that it can lead to slower production, different equipment failing to work together seamlessly, increased administration costs, varying quality and an inventory that is more difficult to manage.”

In recognising this challenge, Southgate configured its organisation specifically to meet this need fully. Serving over 3,000 customers in more than 20 countries around the world, Southgate prides itself on offering an end-to-end solution, a reliable partner that customers can turn to at every stage. 

On the benefits of supplier consolidation, Brasier added: “By offering customers the choice to consolidate the value of their spend into one supplier, it not only gives them the option to negotiate better deals, but also to reduce costs and simplify their ERP. 

“It also builds better, longer lasting and more trusted partnerships, with only one place to turn for all the support an organisation might need.”

As the market is making a shift, Southgate is sharing advice and guidance to those who are looking to make the switch to a single-source supplier or simply seeking ways to reduce the size of their supplier list. 

Brasier said: “The first steps to take are to identify the total number of suppliers you have for your products or services and identify their role within your supply chain, and then rank them against other vendors who supply the same product or service to work out who comes out on top.

“You can do this by downloading our Supplier Evaluator Matrix, which is a tool designed specifically by the Southgate team to allow you to assess suppliers against a particular set of criteria.

“Secondly, you need to create a consolidation strategy, which will help you identify the benefits you expect to see from supplier consolidation both financial and non-financial, and access the potential value of those benefits.”

Brasier went on to explain the final two steps, which include negotiating and communicating with your vendors to create a customised service plan with clear KPIs and monitoring performance post-consolidation to ensure your standards are being met.

Looking at the future of the supplier market, Brasier said: “As logistics challenges intensify, the demand for a supplier offering an integrated end-to-end solution will only grow. Building a strong, long-lasting relationship with a single supplier who offers direct and in-direct cost savings and efficiencies and has a wealth of expertise and resources will all begin to set operational logistics and fulfilment suppliers apart from one another. 

“At Southgate, we’re proud to be ahead on this, already working in synergy with some of the world’s biggest organisations in key sectors including 3PL, e-commerce, retail, post & parcel and general manufacturing. Through our wealth of equipment, consumables, and servicing expertise, backed up by our design and global sourcing capabilities, we plan to be the reliable single source that keeps their business moving.”

To download Southgate’s latest white paper on supplier consolidation and to use its Supplier Evaluator Matrix, click here.