Your Procurement team is looking to produce the maximum possible value from its spend analyses. As a result, it’s sometimes tempting to ignore suppliers that look like small fries on paper. Spend analysis initiatives, however, are rarely so simple. Oftentimes, spend consolidation opportunities are more valuable than relationships with high-spend vendors.
Typically, it’s easier to exercise leverage in negotiations with low-spend suppliers. Offering a greater purchase volume in exchange for more competitive rates, for example, can create a win-win situation for both sides.
Consolidation can also provide soft-dollar savings opportunities. Think of how much simpler things become when you’re contending with a small supply base. Failing to classify these small spend suppliers could mean missing out on opportunities to eliminate inefficient relationships. Existing agreements with small fries can provide opportunities for leverage and consolidation, but only if you pay attention.