Vendor Consolidation in Packaging: Why One Supplier Beats Ten

Like everything in your business, managing several packaging suppliers is part of the normal order of operations. Right up until the moment it isn’t, and you realize how much it is costing you in time, money, and your mental well-being to control. One vendor boxes, one vendor labels, one vendor wraps, next thing you know, you are working on the impossible task of invoice reconciliation, stash the quality is up to par, and endless omnidirectional invoice chasing. 

Ring a bell? This is a a-1 case scenario for “too few cooks in the kitchen” 

“If you only have one supplier, pivot the entire shipping logistics for the vendor’s shipping problem. Untangle the entire solution from the shipment of the vendor.” 

Too many suppliers are:

• Conflicting delivery schedules that slow your operations
• Inconsistent packaging quality that frustrates customers
• A mountain of paperwork and admin that steals focus from what really matters
• Missed volume discounts because your purchases are spread too thin

The simple act of gaining volume discounts saves a lot of effort, time, and, in the worst case, un-optimization. 

More intelligent companies are uniting. This is the only thing that really works in communication: consolidation.

Why One Supplier is More Than Just Convenience 

Business communication with one packaging supplier is like sticking with a single coffee shop, mentally framing the barriers to switching other denouncing other coffee vendors as limbs to one’s main body, and keeping the other vendors as ‘parts’ that do not connect to the body of coffee culture. 

Vendor and its single packaging supplier enjoy, and, hence, bring to market, innovatively framed buzzword terms rationalizing vertical integration as single-source convenience and as a one-stop shop: 

• Unmatched Value: Block contracts, where a buyer is locked into a minimum offtake, are a widely used profit maximization strategy, utilized in addition to value-based pricing, in value chain systems that embrace single vendor integration.
• Unsurpassed Excellence: One supplier handles a complete server, and hence, has to manage server spillover, on which a coffee vendor has little control, which means server parts and assembly are unified with the packaging vendor.
• Streamlined Communication: The need for fewer invoices and contracts to manage is reduced, and hence, with direct savings on administrator expenses, spending time defending the invoices and contracts is considered a trivial savings.
• Fast Cash: Hend to dispenser simplification results in cash to cash in moments to sip the coffee.
• More Additive Solutions: A valued engineer bringing synergy with others elongates the new component system in the value chain of the supplier.

The key is not to single out the absence of non-linked coffee shops as limbs, and embrace all other coffee to solo-frame holding cups as limbs to value-chain optimized systems.

What About Variety? Don’t You Need Multiple Vendors? 

People are often skeptical about working with a single supplier out of concern that it may limit choice or flexibility. However, it seems that many packaging partners today offer a full suite of solutions under their roof, from eco-friendly boxes to custom inserts and specialty tapes. 

Many of these suppliers have long-standing partnerships with raw material suppliers and are able to easily access nearly anything that is needed. Additionally, these suppliers’ pragmatic understanding of your products and processes means they are able to offer smarter packaging solutions that are much more efficient than what most people would expect when working with disparate suppliers. 

Yes, you still get a lot of variety. You get it with less disarray and more tailored service. 

The Real Numbers: What Consolidation Can Do For You 

Let’s discuss outcomes, because it is not a theory that there are positive outcomes to vendor consolidation. Firms have reported positive outcomes, which include the following: 

• Lower Administrative Expenses: A team of people managing the same contract is more likely to work efficiently than a team of people managing multiple contracts. Many report that operational efficiency increases by more than 15% when there are fewer contracts.
• Less Excess Packaging Waste: Accurate forecasting leads to better bulk ordering, which directly correlates to less obsolete material. 
• Increased Negotiating Leverage: When the budget is consolidated, you are able to negotiate better pricing and terms because of the larger spending capacity.
• Improved Quality and Delivery: Improved supplier collaboration translates to decreased levels of damage and enhanced predictability of shipping schedules, and these are two very important metrics of customer satisfaction. 

A mid-sized retailer disclosed eliminating eight packaging vendors to two leading to almost 10% in savings on packaging in the first year, and the cost in time to procure packaging was also decreased significantly. 

How to Consolidate Without the Stress

If vendor consolidation sounds appealing and ‘doable,’ you are not the only one. Finding new suppliers and especially eliminating old ones can seem like a lot of work. It does not, however, need to be this way, as simplifications can be made: 

• Map Your Current Spend: Reconfigure your budget to include all essential variables: what are you spending on what, and who are you spending it with. Identify any duplications or voids. 
• Define Your Must-Haves: Clearly document all features you need from a packaging supplier. This can include anything from sustainability to speed, or the ability to produce specialty products.
• Perform Tenders: Identify and approach one or two suppliers who can meet all your requirements, and procure samples, brochures, or other relevant materials from them. 
• Pilot First: Try consolidating one category or product line initially, so you can test the relationship and iron out any issues.
• Communicate Openly: Share your goals, timelines, and challenges with your supplier. Collaboration is key to success.

Heads Up: Engage Your Backup Vendors

Wholesalers having one supplier is one thing, but having backup vendors on contract and ready to go is much more prudent. There are disruptions in supply chains. There are unexpected spikes in demand. There are quality-assurance issues. Alternative vendors insulate your business against these shocks. 

Wrapping It Up: One Supplier Can Change the Game

No, a single supplier for your packaging does not equate to a loss in revenue. There is also the question of making the whole packaging approach strategically automated and hassle-free. 

Reduction in the number of suppliers makes the communication more straightforward, quality assurance more consistent, and the business partner supplier better understands the business. Increased focus on growth revenue, minimizing stress, and more time to spare is the winning recipe. 

When your packaging is accompanied by a constant feeling of juggling, it is very likely time to evaluate your suppliers. Handing complete control to a single vendor tends to smooth the process.