You’ve heard the term “bundling” before. Perhaps the best analogy I can come up with is your home and auto insurance. You get a discount on one if you buy the other. It’s not often that you hear of someone who has their home and auto insurance with two separate agencies.
It’s extremely common to have your ink and toner, office products, janitorial supplies, break room/food service, safety supplies, and office furniture with six different suppliers. Often times the reason behind this is because you have 2 to 6 different people within your organization who are responsible for handling each one of these product categories or you don’t have access to a supplier who has a deep enough offering to consolidate these purchases under. Depending on your market there are distributors who have created the “endless isle” of products supplemented by product experts. There are many benefits to bundling these purchases under one supplier.
- Speed without a doubt is the most important benefit to single sourcing these services. No longer are you dealing with 3 to 6 different suppliers to track down orders, ask for missing invoices/packing slips……..you get the idea. The last thing you should be worried about is when your toilet paper and HP toner are going to arrive. You now have one single point of contact for everything.
- Lowering your cost of goods should definitely be on your list of projects to accomplish if you are considering bundling these services together. You won’t save money on every single item you consolidate. There may even be 1 or 2 categories where the price is close enough to what you are currently paying to warrant bringing them over. Remember, you’re no longer looking at each category, it’s the overall savings of each product segment combined.
- Reporting is a major component of ongoing analysis. If you are working with a distributor who has the “endless isle” then chances are they have access to in depth reporting on monthly spend, savings off of list price, item velocity (usage) and category spend. If you’re working with 3 to 6 suppliers you’re going to have a tough time pulling all of this data together. Let your distributor know that you expect either monthly or quarterly reporting with all of the necessary KPIs.
- Leverage is hard to attain if you’re using 6 different suppliers. Let’s look at it this way;
Here’s what you’re spending on Break Room supplies
Now let’s bundle all of the services together;
$3,000 Break Room Supplies
$5,000 Office Products
$3,000 Ink and Toner
$10,000 Janitorial Supplies
$4,000 Industrial Supplies
$3,000 Safety Products
Now you have real negotiating leverage to lower your overall cost of goods across the board and a supplier is much more likely to entertain a bundling of services
- Billing is often overlooked in the negotiation process. It is a significant benefit to have all of these expenses on the correct GL expense accounts and then summarized to weekly, Bi-Monthly, or Monthly Billing. Would you rather have 100 invoices or 12 summary invoices a year to pay? Most Distributors have GL coding capabilities to insure these purchases are being billed to the correct accounts. Take advantage of it! It doesn’t cost the distributor a dime.
I don’t care who you are working with and I don’t require that you work with me if you have questions about bundling your business supply programs. Hit me up if you have questions or if you just want to talk at firstname.lastname@example.org .