Consolidating Your Risk

Supply chain issues are affecting business all over New Zealand.

Reducing the risk your business is exposed to is the main objective in the current climate, especially with the reduced availability of goods and extended shipping times. In these scenarios businesses often look to increase the number of vendors they deal with to reduce the risk or issues they are experiencing.

This can seem like the best decision for your business, however, if you look to reduce your risk by increasing the number of vendors you engage with, you could be doing the opposite. The costs associated with engaging with a supplier can be more than you are aware of.

Some case studies have reported an average of $5,000 per year to maintain a supplier. These costs can include multiple interaction costs such as phone calls, meeting times and emails to name a few. To process a purchase order, it can cost around $80-150 per order, not to mention logistic costs. These costs can add up quickly when spread across multiple suppliers.

A large multi-site national food processor had a fragmented supply chain that was developed over a number of years based no site driven suppliers.

While this appeared to achieve competitive pricing and top-level service for the business, it ended up reflecting a critical lack of control, transparency and added cost.

The risks of a fractured vendor base

  • Hundreds of thousands in extra engagement costs

  • High levels of obsolete stock

  • Lack of consistency and safety compliance

  • Multiple deliveries to sites

Due to the historical nature of the structure this also led to bad buying practices and posed the added challenge of changing these behaviours. Having the expertise and framework to help break down was critical in developing a new consolidated buying structure.

By reviewing your vendors to ensure you are dealing with usppliers that can offer specialist expertise knowledge and access to a comprehensive range of products, you are effectively reducing the risk you and your customers are exposed to.

At Snell we have experience in helping businesses manage their vendors and the risks associated with this. For more information around the benefits that your busienss could gain from consolidating your vendors, please contact your Snell representative.

Having issues with your supply chain?

Get in touch with our team of to help you mange your risk

Auckland office