Lower purchasing costs. Lowering costs is one of the advantages upon which consolidating suppliers are built. If for instance, you have various suppliers for CNC machining, industrial welding, painting etc. You can decrease purchase order threefold if all metal components needed all three services. A single supplier for all these manufacturing processes can work together internally better compared to three separate vendors. Moreover, assigning more order to fewer suppliers, you also can receive better pricing deals for the product.
Lower process costs. If you have less supplier base, you will also significantly lower your transactional costs such as general freight, handling or shipping fees and other expenses required in setting up a supplier internal system and completing transactions (supplier meetings and negotiations). Lesser suppliers mean you only need to talk or contact one or two people to negotiate or resolve an issue. Meanwhile the time you save in talking to less suppliers can be spent for high-priority objectives and functionalities of the company.
Reduce risks. Depending on less suppliers will greatly decrease you risk also. With less people to talk to and manage, you can better concentrate on fortifying and obtaining all your needs and prevent risks throughout the supply chain. For instance, you can improve on compliance and other legal policies that both you and your supplier need to adhere to. Compliance is one benefit of supplier consolidation that is beyond cost savings. In CNC machining where tasks are repetitive, any mistake in specification compliance can potentially render the whole production a waste. Supplier consolidation allows for one less thing to think or concentrate about thereby allowing you to focus another important aspect of manufacturing which compliance is.
Foster stronger supplier relationships. Managing lesser suppliers gives you more time to focus on improving and strengthening relationships with your principal suppliers, accomplish prospects and align tactical ideas and missions. If for instance an issue or problem arises about mechanical parts, you can immediately convey and discuss about it with your supplier partner instead of burrowing through a heap of supplier communications. You also get to know your suppliers well in a more intimate level than if you are talking to a lot. In that case, you also become aware of any problem that may arise about your supplier or any change that would affect your business.
Improve consistency. The less or more consolidated your suppliers especially in a global scale, the easier for you to manage supply. More specifically, you can better validate and check of the service delivery and consistency of the quality of supply which is rather difficult to achieve when supplies come from different sites with different policies and follow different processes and compliance procedures.
Empower contract manufacturers. Instead of competing against each other to get a contract with you, suppliers are forced to work together to meet your requirements and look things in a larger picture which is ultimately beneficial for your business.