How to do vendor consolidation

Top 5 Ways in which Payout enables vendor consolidation

Lets talk about two things in this article – a) vendor consolidation and b) payment process after consolidation

If you’re running a business that relies heavily on sourcing products from various vendors spread across the region, you might find yourself in a pickle. Each vendor supplies the same product but uses a different process to manufacture and deliver those products. You as a business owner need to prioritize product quality and delivery over everything else. If your product is inferior to the competition, the chances of survival of your business are lowered dramatically. 

You need to ensure that you free your business from wasted time, cash and multiple low-quality vendors. But before we jump into the details, lets first have a look at what vendor consolidation is

What does vendor consolidation mean?

Vendor consolidation is a strategy that falls under supply management. This has especially gained popularity in the last 10 years. Simply put, it is the process using which you can reduce the number of your vendors (or suppliers) that you frequently place orders from, to just a small group of trusted and high-quality vendors.

Lets further break down the problem 

  • You sell products in various categories. And this is not just limited to physical products. The meaning of “product” here can vary in nature depending on the industry your business is in.
  • Each of these products belong to different categories
  • Each of these categories/niches have multiple vendors offering the same products (but of different quality)
  • You now have multiple vendors for each category of product that you sell.

The goal is to consolidate as many categories as you can – purchase products from the same vendor to narrow down the overall number of vendors that you do business with. This will tremendously help you save time and ultimately a sizable chunk of money too.

Lets look at some of the benefits of vendor consolidation

benefits of vendor consolidation

Saving cost

Approximately 60 percent of procurement costs are constituted by simple operational things like the time taken in finding the right vendor, shortlisting the products, generating and placing a purchase order etc. 

Once your vendors are consolidated, your cash flow is optimized, as a direct result of which, you will be able to do higher volumes in terms of placing orders. This in turn will result in better prices, lower handling and shipping costs and ultimately in optimal use of your time.

Saving time

As a business owner, it is super important for you to invest your time in things that need urgent focus and attention. If you have multiple vendors lined up for the same product, there are chances that you will waste time in onboarding multiple vendors, attending various meetings with them and ultimately getting distracted from your main tasks. As a business owner, you need to be focused on the one thing that really matters – growth and survival of your business. Consolidating your vendors will help you save time and focus on growth.

Better buying power

By assigning higher resources to fewer vendors, you are automatically increasing the purchasing power of your business as a whole. Dedicating more money to fewer vendors means a higher average budget per vendor. When this happens, vendors inherently get incentivized to provide you their products at a more discounted price. This will help you forge stronger relationships, optimize your cash flow and ultimately increase your buying power.

Enhanced vendor relationships

It is no secret that vendors can not only be retained with monetary value. Vendors also consider the ease of doing business and the time within which they get paid. If you have fewer vendors to worry about, you will naturally end up building stronger relationships with these vendors and work towards building trust.

Better reporting & accounting

Automating your accounts payable processes <insert AP automation article link> will help you better in understanding where your money is going. If you make use of a powerful AP automation software, you are better equipped to understand which vendors are consuming your cash flow and which vendors deserve the limelight.

The things above all sound good in theory. But you will not be able to accomplish any of these things without the right tools. If a manual process is adopted to achieve these things, it is going to be very costly and time consuming. It is best to make use of an automated platform that will manage all your vendors in one place – from beneficiary management to invoice processing, payment clearance and reconciliation. 

Karbon Payout has it all

vendor consolidation made easy by Payout

This is why Karbon Payout is the favorite place for our customers to consolidate all their vendors

  1. Save costs and optimize cash flow. By using Karbon payout, you not only save time but also money. How? There are no hidden charges associated with using Payout. Spend on what really matters – acquiring high quality products and distributing them within your target audience. We do not levy any kind of hidden fees and charges.
  2. Save time with reduced manual hassles. Karbon payout is a great way to automate your accounts payable process (AP process). Send payout links to your vendors and let them add themselves to your system. This feature will certainly let your vendors know that you are serious about automation and are willing to share this benefit of automation with them.
  3. Pay your vendors on time and reinforce relationships. Payout comes loaded with various features that ensure your vendors get paid on time, which will in turn result in a better relationship with them. We have built some great features into Payout like enabling 24×7 payments. It also comes loaded with an intelligent system that automatically selects the best payment channel – NEFT,RTGS,IMPS based on predictive algorithms.
  4. Power of insightful reports, at your fingertips. Payout makes it easy for you to reconcile and track all your transactions, giving you a deeper understanding of where your cash is going. You can track all payments and invoices from a single dashboard and better understand which vendors to consolidate and which vendors to drop.


Written By

Nikitha Reddy
Growth VP @ Karbon


How does payout work as a vendor consolidation tool?
Payout links – all you need to know.
Member access – Payout
Can I make payments to my vendors using Karbon Card?

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