Vendor Consolidation: How to Know It’s Time

Today’s business leaders often work with various service providers. Whether it’s software-as-a-service, auditing firms, or payroll administrators, companies benefit from outsourcing tasks that are not part of their core competencies.

But how many vendors is too many? How do you know when it’s time to reduce your vendor roster, find an exclusive partner, or take some tasks in-house?

In this blog post, we’ll explore vendor consolidation and why it might be the right choice for your company.

Let’s get started.

Commonly Outsourced Business Functions

Businesses across all sizes and industries work with different suppliers to keep their operations running. Here are a few examples:

Technology service providers offer IT services like network maintenance, cloud solutions, and help desk support.
Logistics companies help their customers with the transportation and storage of goods.
Staffing agencies like Insight Global source, interview, hire, and onboard temporary workers for their clients or find full-time employees for them. We also offer a full suite of professional services (more on that below).
Marketing and advertising agencies work with their clients on developing and executing marketing campaigns.

This list is just the tip of the iceberg. There are countless providers out there that fill essential roles for businesses.

Evergreen, for example, is a supplier of a variety of professional services. We can help businesses develop and implement their technology strategies, manage their talent and optimize their performance, and provide expert support on engineering projects.

But some businesses find that managing numerous suppliers can be challenging, and they may even consider consolidating their supplier list to a few key vendors.

Let’s explore what it means for organizations to shrink their supplier list, why it may be beneficial, and how to know it’s time to act.

What Does Vendor Consolidation Mean?

Vendor consolidation, sometimes referred to as supplier consolidation, is a supply chain management strategy used by companies to reduce the number of vendors or suppliers they work with.

While having a large vendor portfolio can offer flexibility and access to specialized tools and expertise, it can also lead to complexity, increased costs, and hard-to-manage inefficiencies.

What Are the Benefits of Vendor Consolidation?

Companies consolidate their vendor list for four primary reasons:

Cost Savings

By decreasing the number of vendors they work with, companies are able to negotiate better pricing with the vendors they choose to keep. This allows them to increase their purchasing power and maximize efficiency with time spent handling administrative tasks and paperwork. And while any company can benefit from cutting its budget, smaller businesses can especially benefit from vendor consolidation. Managers can cut down on unit, transportation, and handling costs and reallocate savings so as to better benefit the business as a whole.

Increased efficiency

Reducing your list of vendors also reduces your employees’ workload and increases your business’s operational efficiency. The time saved by working with fewer vendors enables employees to streamline tasks and increase productivity with this smaller number of suppliers. This in turn allows them to focus on aspects of the business that lie outside the procurement process.

Better vendor relationships

Building and maintaining strong relationships with vendors should be a key focus for your business. However, having a large number of vendors doesn’t mean you gain stronger relationships with your partners—in fact, the opposite is true. Focusing on select vendors allows you to strategically create deep connections and to manage those connections more productively and personally.

Improved visibility

Clarity is important across business operations. And a vendor consolidation benefit you cannot overlook is improved visibility within your supply chain. Working with fewer vendors means minimizing risks and creating opportunity to proactively prepare for those risks alongside your chosen partners. When cultivating a limited number of suppliers and middlemen, you’re able to better control both costs and service quality. Then you’ll be able to clearly track your products through every stage of the process.

Scott Cornick, Director of Talent Services at Insight Global, has been a part of many vendor consolidations throughout his career. He highlights that the greatest vendor consolidation benefit he’s observed is the shift from having “just a vendor” to establishing a true, long-term business partner who’s invested in your goals.

“We’ve seen several of our largest enterprise customers begin large vendor consolidations through the first half of 2024—often reducing their vendor population from several hundred to low double-digits—and we expect this trend to continue into 2025,” Cornick notes. “The largest drivers for these consolidations have been cost savings and, most importantly, a desire to get a higher level of service from their partners. This is tied directly to the value their partners provide to their organization and their business results.”

What Are the Risks of Vendor Consolidation?

There are a lot of benefits of vendor consolidation, but it also comes with some potential risks that need to be considered.

Integration challenges and service disruptions
Internal resistance from employees who are used to certain vendor processes
Economic and market risks
Innovation stagnation

However, you can mitigate the risk of supplier consolidation with a strategic vendor consolidation strategy.

The key is to avoid having a “catch-all” supplier. Instead, reduce your supplier list to a few trusted partners in each of your business areas, then work with them on integrating into your systems, processes, and technologies to mitigate disruptions.

For example, you might have one vendor for staffing, another for IT services, and another for logistics.

It all depends on what your business needs, but by consolidating your vendors thoughtfully, you can ensure each one is focused on their area of expertise, reducing overlap, improving efficiency, and fostering stronger relationships with your main suppliers.

How to Know It’s Time to Consolidate Your Vendor List

1. An Unmanageable Portfolio

If your vendor portfolio has become so large that it’s challenging to manage, including ensuring optimal funding to pay them, you may need to start making cuts.

Without reducing your vendors in this situation, you risk facing large-scale administrative complexities and straining your company’s resources.

2. An Increasing Budget

Vendor costs may keep increasing without a corresponding increase in quality or value to your business. These ever-rising costs from multiple vendors can cut into profitability, so a spiraling budget is an excellent indicator that it’s time to either negotiate better pricing or pare down your list of vendors.

3. Issues with Quality and Performance

An obvious sign that you might need to reduce your vendor list is that you are having issues with quality and performance.

If a vendor consistently fails to meet quality or performance standards, you risk harming your product or service quality, customer satisfaction, and even your brand’s reputation.

4. Service Duplication

Some or multiple vendors may provide the same or similar services, which can lead to inefficiencies and wasted resources. It’s an easy call to start auditing vendors you suspect may provide the same services and start reducing these redundancies.

5. Additional Signs and Reasons for Consolidating Vendor Services

The above are the most clear-cut reasons that it’s time for you to consider assessing your vendor services. But there are a few more reasons to keep in mind, like the following:

Complex and time-consuming procurement processes
Lack of strategic alignment with your company’s vision, mission, and objectives
Ineffective and inefficient communication that causes confusion and bad outcomes
Challenges in monitoring and evaluating vendor performance

Evergreen Can Help You Assess Your Vendor Roster—and Provide Solutions

The benefits of vendor consolidation are numerous. Our Evergreen team can help you evaluate your managed service providers and much more to determine the value of the services they provide and your relationship with them. We’re here to offer you objective thoughts about choosing the right vendors and provide solutions to fill in any gaps.