Supplier consolidation is the process of reducing suppliers by focusing on the most cost-effective or successful suppliers only. Consolidating suppliers is a strategy that can be implemented by any industry.
The focus here is to find opportunities to merge, either by service type, common suppliers or similar markets. We can optimize your spend with the objective of organising it and finding common patterns.
Our supplier consolidation algorithm provides the following benefits to your company:
For this analysis we make use of invoice data only. Data that our model requires to optimize the supplier base contain attributes like vendor name, amount, payment date, product description, product group.
Our algorithm is capable of optimizing you supplier base given a number of constraints. You have for example the ability to fix suppliers you have a good relationship with, or suppliers with long-term contracts. Within the solutionspace the algorithm will come up with suggestions for consolidation. A success probability is added to define the practicability of the suggestion. The output is provided through:
Companies often buy similar product groups at different suppliers without knowing. Our algorithm is able to detect these shared groups.
Using our algorithm consolidation opportunities are analysed after which an optimised solution for consolidation is provided based on price, volume and long-term contracts.
Based on the output one is able to reduce the supplier base radically which can result in better contract terms with the remaining suppliers.
The Sankey diagram above shows graphically how the spend flows from the suppliers on the left to the suppliers on the right.
In the middle you will find the product groups concerned
With the Supplier Consolodation optimization you are able to further consolidate your suppliers. Based on an optimization algorithm, the optimal number of suppliers is determined where you can best place your purchases.
The limits within which this optimization calculation must take place are predefined and given to the algorithm. The new insights may be a reason to take actions towards suppliers and adjust the contract conditions.
In the demo you can see the result of the algorithm. You can see which suppliers have been eliminated and how much spend is removed from one supplier and transferred to another supplier. This is a calculated optimum.
Note: all data-attributes and visuals in this webpage are based on fictitious data
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