XYZ Ltd decides to go to market for a cleaning contract to service a number of offices. It knows that it will get a price which may, or may not, be…

Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend

consolidation can take many forms as outlined below:

- Vendor base reduction: straightforward reduction of number of suppliers in any category

- Volume pooling: pooling cross organisational requirement until your order volume is high enough

to attract new bidders/additional discounts

- Volume redistribution: making recommendations following spend analysis to move from one

supplier to another

- Volume consolidation across categories: certain purchase requirements may be common across a

number of categories. In the scenario, XYZ has combined different categories but closely related to

office services into a larger contract so that they can increase their leverage.

- Standardisation and harmonisation of specifications: analysis of specifications and standards for a

high spend purchased input, may show that there is a little difference between them and that the

specification can be standardised or at least harmonised across the group or across national, regional

or global operations.

- Forming purchasing consortia: buyers may decide to come together and combine their purchase

volumes to attract better deals.

LO 1, AC 1.3