A number of manufacturers these days are seeing their business models shrinking, forcing them to do more with less people. Where there may have been fifteen procurement officers, there are now three. With a dramatically reduced staff looking at a list of hundreds of vendors who offer very similar services or products, there is plenty of opportunity to consolidate.
In stratifying their lists, a number of our customers have awarded us strategic status, in many cases transferring work previously being done at other facilities into ours. Transferring production means transferring dies, something that most manufacturers are wary to do. Often times going to a new vendor can be very costly as the design strategy can vary greatly from what currently exists in house at the new vendor.
We avoid that. We’re a contract manufacturer at heart, with our own set of in house standards. But we can work with hundreds of other standards. We’re not of the opinion that because it’s different, it’s wrong.
Consolidating vendors can allow manufacturers to take advantage of economic order quantities (EOQ). By maintaining an overly large pool of vendors, many manufacturers are spending more money than they have to by ordering too small a percentage at each vendor. For example, here at KS Tooling most of our products are made of high copper content alloys. The more of these raw materials we order, the better the price we get. So the more a manufacturer orders from us, the lower their raw material costs.
Vendor consolidation is a strategy we’ve seen strengthen the businesses of many of our customers. From our experience with die transfers, to ERP and MRP systems that are set up to manage high volume stamping, we work hard to position ourselves as a strategic partner for our customers.