Vendor Consolidation Vs. Diversification: What is the Best Supply Chain Strategy?

Vendor Consolidation or Vendor Diversification: The Best Vendor Management Strategy for Supply Chain

Vendor Consolidation Vs. Diversification: What is the Best Supply Chain Strategy?

The pandemic brings the focus back on the classic debate: vendor consolidation or vendor diversification? Which of the two is the right supply chain management strategy. If your sourcing managers are searching for an answer to the question, we have got you covered. The truth is that your supply chain’s digital readiness can make all the difference to the answer.

What is Vendor Consolidation and What are its Benefits?

Vendor consolidation is a strategy to rightsize the existing supplier base and make it more cost-efficient, quality-centric, and stable. A vendor consolidation strategy will require you to map the value and category of procurement against each supplier and procure more industrial supplies from a chosen few suppliers. You can now reduce the number of vendors and reap the following benefits:

  • Reduced Purchase Costs: When you purchase higher volumes of industrial supplies from handpicked suppliers, you will have higher bargaining power and ask for discounted prices. You can also explore the option of annual rate contracts to seek effective insulation against price increases. 
  • Reduced Process Costs: Once you reduce the number of suppliers, you will reduce the number of purchase orders and invoices.  You will reduce the turnaround time for placing orders by integrating more line items in each order. You will reduce your process costs.
  • Reduced Mismatches in Supplies: One of the hurdles of a large supplier base is many supplier codes, material codes, and supplier catalogs. Vendor consolidation allows your sourcing managers to work with fewer supplier codes, material codes, and catalogs. You will reduce the scope of mismatches between items that you order and those that you receive. 
  • Improved Supplier Relationships: When you increase your purchase orders’ value, suppliers will undoubtedly accord greater attention to your requirements. You can look forward to stable and reliable supplier relationships over the long term. 

What is Vendor Diversification and What are its Benefits?

A vendor diversification strategy will require you to spread out your supplier base and work with many suppliers. Following are the benefits of vendor diversification:

  • Opens Multiple Channels of Sourcing: Vendor diversification opens up multiple sourcing channels for your enterprise. It spreads out the procurement risks across a large number of suppliers and reduces your dependence on each supplier. 
  • Promotes Innovation and New Product Development: Vendor diversification augments innovation and new product development. You can engage with multiple suppliers, browse through their offerings, and select the one that fulfills your requirements. 
  • Promotes Competition among Suppliers: One of the benefits of diversifying your vendor base is that you have greater flexibility to choose your suppliers for each purchase order. It allows you to create an environment for competitive bidding and opt for the lowest price to get a competitive advantage. 

What is the Best Supply Chain Strategy?

The best strategy depends on product category, procurement processes, and technology maturity. In the long run, for large and growing businesses, vendor consolidation provides the scale with reduced costs. The pandemic experience has shown that effective supply chain risk management calls for visibility into procurement.

Digital procurement solutions allow you to leverage analytics, map supplier performance, and make purchasing decisions. You can lean on an integrated platform with an inclusive supplier ecosystem and a single catalog managed by a single point of contact. This way, you can consolidate your supplier base, re-engineer your procurement process, and de-risk your supply chain.

Embracing Self-Care During the Pandemic

Embracing Self Care

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If you’ve developed productive and healthy habits during the lockdown, you might not be prepared to go back to exactly how things were before. Piyush Malviya, Senior Director – International Ops at Moglix, shares how 2020 has served as a great enabler of self-improvement, health, and wellness.

During this pandemic, Piyush saw a new and improved version of himself. The 21-day challenge that he took up, transformed his life, giving him a crystal vision of organizational tasks. And now, it has become a habit to eat clean, workout, and live an enriched life.  

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Jigyasa Kishore, Senior Director- Technology & Pallavi Chelluri, Director, Enterprise Marketing at Moglix Business discuss their experience with the emergence of contactless customer journey in the post-pandemic world.

As customer journey becomes contactless, transitioning from online from offline, brands are focusing on understanding the deep motivations of customers and creating experiences which fulfil the customer’s seen and unseen desires.

The pandemic has only accelerated changes in customer expectations and behaviors which were a long time coming. It is up to the brands to understand the impact of the pandemic on their customers and develop a digital first experience which provides safety, social interaction, and delight.

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If you are a manufacturer, your packaging supply chain manager is likely to list three significant packaging challenges.

  1. How do I reduce packaging costs? 
  2. How do I identify and reduce the in-transit losses of my goods?
  3. How do I put my enterprise on track for continuous improvement? 

If you face any or all of the above challenges, you are looking for a robust and periodic packaging audit program with the following benefits for your enterprise.

Explore the Cost Advantage of a Lean Supply Chain for Packaging

Optimizing the packaging inventory is a significant challenge. Holding high inventories of packaging SKUs can block your enterprise’s working capital. On the other hand, an inventory stock-out can directly affect your distribution and reduce revenue through lost sales. A packaging audit can enable you to rightsize your packaging inventory, unlock working capital, and reduce indirect costs. You can also explore EOQ levels of inventory by using artificial intelligence-enabled analytics and migrate towards a lean supply chain.

Reduce Wastage and Losses in Transit During the Supply Chain Journey

Pilferage, wear and tear, and spoilage during transit can lead to formidable losses to your enterprise. One way to reduce such wastage and losses is to re-engineer packaging as per the logistics lens. A packaging audit can enable you to map the logistical challenges across multiple modes of transportation and choose packaging solutions that provide the best fit for each stage of your supply chain journey. 

Continuously Improve Through Total Quality Management in Packaging

The COVID19 pandemic has ushered in a new normal. How do you explore new avenues to stay competitive? Class C spend items like packaging cater to less than 10% of the unit costs of end products but are likely to affect more than 10X of the value of your goods if you get it wrong. A packaging audit can help you to discover the most significant opportunities to enable continuous improvement and total quality management in packaging. 

Are you exploring a Packaging Audit for your Manufacturing Plant(s)? Testing and diagnosis are integral to both human and enterprise health. With a packaging audit across your plant locations, you can detect challenges early and adopt remedial measures with agility to reimagine your packaging. 

If you feel that your packaging could be improved but don’t know where to start, please get in touch with us here. You can also learn more about our packaging solutions by clicking here.

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Remote Working and Digital Preparedness in the Future

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Sandeep Goel, SVP- Tech, Moglix Business, shares his insights on the need of enabling digital transformation in the New Education Policy (NEP), not only as a learning of the ongoing crises but also to power the future human capital with the required tech skillset.

He emphasizes on how technological progress will continue to be the most significant enabler of economic growth, now and in the future, enforcing for the NEP 2020 to focus on user experience and design thinking, developing a mindset for testing and validating, and be able to develop vertical awareness to enhance the product management skills.

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Moglix insights on the performance of infrastructure sector during the crises and its future

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Abheet Dwivedi, DIrector- Strategic Partnerships

Abheet Dwivedi

Strategic Partnerships
In the 8th episode of Moglix Talks titled “Now and Next in the Infrastructure & Construction Sector”, we have Abheet Dwivedi, DIrector- Strategic Partnerships to share his insights on the Infrastructure and Construction Sector. He discusses the effect of the ongoing crises on the sector , challenges the industry is facing, what are some of the public and private initiatives being taken for the recovery of the sector, and what its future looks like.

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Ratan Tata-backed Moglix Expands Operations in the UK, Europe

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At a time when the world is grappling with a dire lack of coronavirus-related supplies, B2B eCommerce startup Moglix Business expanded its service offerings in the United Kingdom and set up operations in Europe. Having been present in the UK since November 2019, it always had a plan for global expansion for its maintenance, repair and operations (MRO), and SaaS businesses in the UK and Europe.

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Sandeep Goel, SVP- Tech, Moglix Business discusses how diverse stakeholders in the logistics ecosystem are facing the challenge of staying connected to the real economy while working remotely. While traditional metrics of cost, quality, and turnaround time continue to be in focus, supply chain security has emerged as one of the key concerns.

Four months into the COVID19 pandemic, the new contours defining the technology enablement of logistics are beginning to emerge. Enterprises are reimagining the future of logistics and zeroing down the gaps in their supply chain by pooling resources and people in their logistics networks, here is where technology will play a role in reshaping the future of logistics by enabling the integration of the core sectors in the real economy with digital platforms.

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