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I am hearing that our department (support services) is looking to take all our vendors and consolidate them under one vendor. The idea being less admin work and that the consolidating vendor would be responsible for ensuring vendor performance.

My thoughts are that you really don't have any vendors who can "do it all" and you will end up paying a management fee on top of the management fees already being charged be the individual vendors. In addition, I think we increase our risk by losing control of not being able to deal directly with each vendor parter.

I could see how this would work if you say have one company run all your document services, another all your facilities services, etc. But to lump them all in one seems a bit strange.

Anyone with other thoughts?

Mark's picture

Folly. Exchanging greater risk, less influence, less transparnecy - all bad - for management ease.

If it happens...the folks you deal with better be very very good.

Mark

pmoriarty's picture

I suspect you will see some short-term cost savings, possibly even significant ones, as the vendor will be under the gun to prove value. The true test of any outsourcing relationship will be in the cost of changes, which can be akin to being pecked to death by ducks.

Long-term cost savings are frequently much below initial expectations. Look at how many companies end outsourcing agreements early and take the processes back in house.

Goos luck with your initiative and I hope you are one of the ones who truly realizes good value!

douglase's picture

Actually you can gain some benefits from doing this. Lets say you get a large company to manage all of your pc hardware contracts with the different PC vendors. You tell them your requirements and then they go out and get them for you.

The trick to getting it to work is to have a very mature contacts area that understands how to cover off on all the areas people will want "wiggle" room. Ie it's the gray areas that will hurt you.

skwanch's picture

[quote]Actually you can gain some benefits from doing this. Lets say you get a large company to manage all of your pc hardware contracts with the different PC vendors. You tell them your requirements and then they go out and get them for you. [/quote]

and you've lost the benefits of having those separate suppliers *compete* for your business.

whatever benefits may exist equate to 'mgmt ease', as Mark says. Ease of mgmt doesn't improve the bottom line, which is, after all, the bottom line.

douglase's picture

We haven't. We build into the contract that we need in any instance two preferred providers. It comes down to how you build the service.

James Gutherson's picture

[quote="skwanch"]

and you've lost the benefits of having those separate suppliers *compete* for your business.

[/quote]

W. Edwards Deming has some things to say on the false economy of selecting suppliers based on cost alone. [url]http://en.wikipedia.org/wiki/W._Edwards_Deming#Deming.27s_14_points[/url]

skwanch's picture

[quote]W. Edwards Deming has some things to say on the false economy of selecting suppliers based on cost alone[/quote]

Cost (whether purely economic or more 'softly' defined) is not the point - the lack of competition is. Whatever the metrics are, the suppliers are not competing to meet those metrics.

danielon's picture

I am in purchasing and I cant imaging one of my vendors to have all that power, at the beginning iam sure it will be ok but at the end the company will have so much power on you that you will regret it, and it is adding other middleman to the process, dont recomend it at all,

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Gareth's picture

You will certainly be handing a great deal of power over to the supplier, how easy would it be to adapt to change?