For utilities and REITs, a sprawling vendor network can feel like a tangled mess of relationships and contracts. Juggling multiple service providers for energy sources, maintenance, construction, and property management creates invoice headaches, communication breakdowns, and inefficient processes.
Managing this complex web can drain resources, hinder profitability, and leave you feeling like you're constantly putting out fires.
When economies of scale backfire, there is a decline in procurement efficiency as companies suffer from hidden administrative costs that can exceed 10% of their total procurement spend. This translates to millions lost in unnecessary expenses and countless hours wasted on tedious vendor management tasks.
But there's a better way. By building a leaner vendor portfolio, you can streamline your operations, boost efficiency, and unlock significant cost savings. This doesn't mean cutting ties with everyone, but rather strategically consolidating, optimising, and building stronger relationships with key partners.
Imagine a streamlined network where communication flows effortlessly, invoices are processed automatically, and you have the data to make informed decisions about every vendor partnership.
Here's how to achieve this in 3 simple steps:
Step 1 - Assess & analyse
Before you can build a leaner portfolio, you need a clear picture of your current landscape. It's time for a vendor audit.
- Take stock: Start by creating a comprehensive list of all your vendors. What services do they provide? What's their performance history like? Are there redundancies or overlaps in services? This initial mapping exercise will give you a solid foundation for further analysis.
- Track performance: Monitor service quality, responsiveness, and adherence to agreed-upon terms. Pinpoint underperformers who fall short of your expectations.
- Data dive: Don't let valuable purchasing data gather dust. Dig into your reports and identify areas of high spending, frequent vendor changes, and opportunities for consolidation. Look for data patterns and trends that can reveal inefficiencies and hidden potential for cost savings.
Felix can be your partner in this crucial step. Our powerful vendor management solution lets you have a helicopter view of your supplier pool, compare vendor performance, and identify areas for improvement. With all the data you need in one place that is up-to-date, you'll be able to make informed decisions about your vendor network based on concrete evidence, not gut feeling.
Step 2 - Consolidate & collaborate
Once you understand your current vendor landscape, it's time to make some strategic moves. Engage in collaborative relationships with vendors that align with your long-term objectives.
- Prioritise partnerships: Focus on building strong relationships with vendors who offer the best-in-class services across multiple areas. This could be a single provider for energy sources and maintenance, or a group of companies that collaborate seamlessly to deliver comprehensive solutions. Negotiate bulk discounts and preferential terms with these key partners to maximise savings and efficiency.
- Performance management: Don't settle for mediocre performance. Implement clear performance metrics and hold your vendors accountable. Use data-driven evaluations to identify underperformers and make informed decisions about renewal or termination. Remember, a leaner portfolio doesn't just mean fewer vendors, it means surrounding yourself with reliable partners who consistently deliver value.
- Transparent communication: Foster transparent communication with vendors, providing feedback and addressing issues promptly to maintain a healthy and collaborative relationship.
- Innovation collaboration: Partner with vendors who contribute to innovation, whether through cost-saving initiatives, sustainable practices, or technological advancements. For example, a utility company might form strategic partnerships with equipment manufacturers that actively contribute to the development of eco-friendly technologies. Simultaneously, a REIT could collaborate with construction vendors committed to sustainable building practices for long-term projects.
Felix can help you manage these partnerships effectively. Our vendor performance evaluation tools let you customise the criteria important to you, while the centralised database means lessons learned are never lost.
This reduces the chance of re-engaging with low performing vendors or engaging vendors not aligned with your strategic objectives.
Additionally, our secure communication platform facilitates streamlined collaboration, ensuring everyone is on the same page and working towards shared goals.
Step 3 - Automate & innovate
This is where you execute the strategies from step 2 and roll out new initiatives enterprise-wide. If you’ve done step 1 and 2 using manual tools or not fit-for-purpose software, there’s a risk of inefficiency and ineffectiveness, which means step 3 may not even be possible.
Depending on the sophistication of the tools used, you may end up having to repeat all of these in six months’ time as the “complexity debt” catches up.
Complexity debt occurred in each step is carried over to the next, causing difficulty getting to the last step
In today's digital age, manual processes and outdated systems are simply holding you back. Embrace automation and technology to unlock the full potential of your leaner portfolio.
And it’s not just any technology. Built-for-purpose vendor management and procurement software would be your ultimate weapon.
Would you rather:
- Use paper, post-it notes and big heavy folders to collate vendor information – and risk losing everything down the drain (literally or figuratively)?
- Use email inbox to track vendor quotes, insurance certificates, payment information etc. and risk being “spoofed”?
- Use spreadsheets to collate vendor data, rate performance, capture notes between different projects and departments – and risk spending more hours reconciliating data than garnering insights?
- Use ERP to collate vendor data, run sourcing events, rate performance etc. and keep everything centralised, after spending significant resources on customising the system – and risk slowing adoption among critical users (e.g. project teams) and them reverting to the old ways above due to the sheer system complexity?
Or would you rather:
Use a purpose-built vendor management and procurement platform like Felix that:
- Caters to the nuanced supply chain in utilities and REITs
- Streamlines and automates manual processes such as chasing vendors during onboarding, following up internally for approvals etc.
- Increases the chance of tech uptake by both central procurement and project-based teams, which ensures governance
- Frees up time so you can optimise your vendor portfolio based on strategic initiatives and/or regulatory requirements (e.g. Net Zero, Modern slavery)
Reaping the rewards of a leaner portfolio
Building a leaner vendor portfolio is not a one-time action, but rather a continuous journey of optimisation and improvement. By following these steps and leveraging technology, utilities and REITs can unlock significant benefits:
- Reduced costs: Fewer vendors, better negotiation leverage, and streamlined processes generate significant cost savings.
- Improved efficiency: Automated tasks, enhanced communication, and streamlined processes unlock efficiency gains, freeing up resources for strategic initiatives.
- Increased transparency: Data-driven vendor management promotes accountability and provides valuable insights for continuous improvement.
- Enhanced sustainability: Strategic partnerships with sustainability-focused vendors can help utilities and REITs achieve their ESG goals
Getting started
It’s a good idea to do this three-step exercise in January when everything and everyone is slowly easing back into work.
By following these 3 steps and leveraging technology, you can escape the labyrinth of vendor complexity and create a leaner, more efficient, and sustainable network that powers your success.
Felix offers a suite of features designed to automate tasks, streamline communication, and provide real-time data insights. From supplier onboarding to running sourcing events and contract management, Felix empowers you to make informed decisions and achieve your lean portfolio goals.
Get in touch to find out more.