It always starts innocently enough: a product manager or a local distributor hires a local vendor to translate the user interface for one new market. Maybe another team repeats that process for the next new product or market. Maybe volumes start to exceed the first vendor’s bandwidth in each market and overflow vendors are engaged.
Globalization programs can easily become saddled with too many vendors, which restricts consistency, cost-control, and effective program management. In the first of our series on vendor consolidation, let’s look at how programs wind up with too many vendors — and how to justify the shift to a short list of approved partners.
Factors That Invite Too Many Vendors
Fast-growing startups and well-established Fortune 500 organizations alike do have some legitimate reasons for engaging dozens of localization vendors.
- Autonomy: Excessive numbers of vendors are common in highly decentralized localization programs where each business unit or regional office is responsible for commissioning its own localization.
- Cutthroat pricing: Many industries cultivate deeply-engrained beliefs around driving supply chain costs down through constant competition.
- Risk management: Organizations with large, time-sensitive volumes fear production logjams that can result from giving any one vendor more work than they can handle.
Problems begin to occur when using dozens of vendors, whether it’s the inevitable lack of consistency across those individually-managed programs or the upward spiral of localization as a budget line-item. It’s often a senior manager’s frustration that drives the initiative to consolidate vendors.
On the path to localization maturity, most global companies eventually stop considering the wide-open field of vendors in favor of a limited pool of known-quantity vendors, gaining these advantages in the process.
1. Lower Administrative Burden
Streamlining your internal purchasing process means fewer employee hours are required to manage fewer tasks. For example, your vendor managers will spend less time in multiple vendor meetings, or working on endless paperwork and contracts. Also, it takes much less time to evaluate — let alone manage — fewer vendors.
2. Buying Power
Many vendors are willing to negotiate volume discounts when receiving high volumes of work. Also, a vendor’s overhead costs do not increase exponentially with this additional volume: vendors may be willing to pass on these cost savings to their clients.
3. Clearer Options
Once you’ve established a set of requirements for vendors to make it to the “short list,” your localization program stakeholders will likely only need to review 10 or so approved vendors, not several dozen. Each localization sourcing exercise becomes far less overwhelming and time consuming when sifting through Requests for Information (RFIs) from fewer vendors.
4. Quality Control
Managing quality across dozens of vendors would require a full time quality manager. It’s far more efficient and effective to impose standards on and to oversee the quality of fewer vendors, allowing for a greater degree of performance management.
5. Faster Onboarding
With fewer vendors, you don’t have to provide the same training over and over. Also, engaging a few vendors to work more often (rather than sporadically) will help keep their knowledge of your specific requirements fresh, requiring less ongoing training from you.
6. Stronger Partnerships
Let’s face it: the greater each partner’s share of your overall localization program budget, the easier they can justify co-investments in joint innovation programs that improve cost, quality, and turnaround time. Enterprises are better able to collaborate more effectively with fewer vendors.
Hard though it may be to accept, the full breadth of localization vendors who brought you early successes are not necessarily the ones to take you to the next stage of global growth. But consolidation doesn’t mean you boil it down to just one vendor — also called single-sourcing.
Many global companies stick with a multi-vendor model to preserve flexibility and ensure security in case business needs shifts unexpectedly, or if one of your vendors becomes unreliable. Many global companies prefer to contract with a short list of approved partners — as few as two or three, and as many as a dozen.
Once you’ve decided to consolidate, you’re in for a new set of challenges: getting diverse program stakeholders to agree on vendor requirements and part ways with their individual favorites. Tune in next week for tips on managing that transition to everyone’s satisfaction.