Penny Wise & Pound Foolish
English scholar Robert Burton is credited with coining the familiar phrase, “penny wise and pound foolish.” Some of us can only be trusted with small amounts of money because when given more they make costly mistakes.
I am constantly looking for ways to wisely save money not only for my company’s profitability but for our customer’s success. One of the ways to accomplish this is to consolidate sources. Having too many moving parts causes confusion and unproductivity.
And business industry experts agree. Take for example The Hackett Group. The global strategic business advisory, operations consulting and finance strategy firm published an article in 2012 called, The Benefits of Supplier Consolidation Extend Far Beyond Sourcing Savings.
Authors Pierre Mitchell and Christopher Sawchuk applied ten years of research in their discussion of three business benefits of consolidating suppliers. They are:
- Reduced purchased costs
- Reduced procurement and supplier management costs – businesses spend an estimated $700-$1,400 in internal costs to “source each supplier, set up in internal systems, transact with it and manage the relationship”. Doesn’t your workforce have more important tasks to complete?
- Reduced noncompliance – always makes stakeholders happier
After reading The Hackett Group’s article you may be thinking, this is great for large companies, but I’m a small business owner. I’m suggesting this line of thinking and action can be implemented by all business professionals who then will experience positive results.
“…a successful vendor consolidation initiative is worth the time and energy you invest. Companies that rely on a consolidated list of vendors tend to achieve higher levels of vendor performance, internal productivity, and enterprise-wide cost savings (Choosing the Most Effective Approach to Vendor Consolidation,TEKsystems.com, Eric Staebell, 2012).
Join me in taking steps to become even more “pound wise” this year. Do you have multiple systems in place or third party suppliers that overlap? If so, why?
Thank you for continuing to choose Coastal as your one stop office and promo products supplier.
John Wilcox, President