On the other hand, in many cases, the extent to which multiple suppliers are utilized is a consequence of localized decision-making processes across the organization and individual preferences to leverage relationships with suppliers.

In either case, the evidence from experience suggests that organizations really need to be determined to rationalize the number of suppliers in their ADM portfolio before undertaking the effort. While the savings are very significant, so, too, are the challenges.

High Costs of Accumulating Suppliers

The simple reality faced by many companies is that outsourcers of ADM tend to accumulate whole families of suppliers. And as time progresses, there's a cost to it. A cost is borne for setting up each relationship, as well as managing it, resulting in missed opportunities for economies of scale.

There are also operational hiccups caused by inter-linkages in project management, testing, and so on when there are so many moving pieces across multiple areas (e.g. performance monitoring, reporting, ensuring accountability) that can result in costly project overruns and significant operational downtime. As a result, leading buyers are rationalizing the number of suppliers in their ADM portfolio and attaining financial benefits plus a less complex sourcing environment.