Why having too many suppliers is a problem

Various studies have shown that it is not convenient to have many suppliers. It is even better to have few suppliers. In this article we zoom in on this problem. What makes many suppliers a problem and what are ways to solve this problem?

The problem

We’ll start with the problem, of course. Because what actually makes it that many suppliers cause difficulties? Remember that you have to do the same tasks for every supplier, such as drawing up a contract, maintaining order data, checking prices and delivery agreements and of course maintaining contact with the suppliers. This requires a certain amount of attention and time from the purchasing organization or the purchasing team for each supplier. A large number of suppliers is therefore extremely time-consuming. So in many cases it is much more efficient to work with fewer suppliers. Make sure that these are suppliers who together provide the largest purchasing volume.

Remove duppliers from the supply file  

We mentioned it before in this article, but solving this problem mainly lies in removing suppliers from the supplier file. In this way, a company strives to place a higher percentage of the purchasing volume with a smaller group of suppliers. For example, you don’t want to spend too much time on routine products. These are products that are purchased regularly and are readily available. Nor do they have a major impact on the operating result. It is recommended to draw up a framework contract. This is a contract in which fixed agreements are made about a fixed price and conditions for a service or product to be provided.

Supplier reduction solutions

How do you properly classify suppliers? You can use the ABC analysis for this. This analysis shows which group of suppliers is responsible for the largest purchasing volume. In an ideal situation, 80% of the purchasing volume is realized by 20% of the suppliers. These are called the A suppliers. The remaining 20% is then represented by B and C suppliers. Does this sound like something for your organization, but you don’t know where to start? Invoice management and procure to pay are good ways to reduce this problem.