Optimizing GCC Operations with Vendor Consolidation

As Global Capability Centers (GCCs) focus on boosting efficiency and agility, vendor consolidation is emerging as a strategic priority. A 2022 Gartner survey revealed that 75% of organizations were actively pursuing security vendor consolidation, up from 29% in 2020.

This indicates a broader shift toward streamlined vendor ecosystems. It reduces complexity, improves governance, and boosts operational performance. For GCCs, consolidating vendors can help gain better supply chain control. Centralizing procurement also removes redundancies and supports sustainable growth.

Why Vendor Consolidation Matters for GCCs 

Vendor consolidation is a key factor in GCC cost optimization and efficiency. As operations scale, a fragmented vendor ecosystem drives up complexity and cost. Consolidating the vendor base streamlines administration, enhances procurement efficiency, and strengthens operational control. Additionally, it builds stronger, more consistent vendor management practices.

Improved vendor management enables GCCs to gain better visibility into resource allocation, thus improving GCC efficiency by providing more control over contracts. It enhances compliance and eliminates redundancies, strengthening supplier relationships, effectively helping companies derive better value from their partnerships. By aligning vendor strategies with broader business objectives, GCCs can build a scalable, cost-efficient operating model that drives sustained growth and operational excellence. 

Steps to Effective Vendor Consolidation

Businesses must streamline supplier management to reduce costs – it is no secret that a structured approach to vendor consolidation is not just essential, but highly recommended. These steps help spot inefficiencies, assess suppliers, and shape a more focused consolidation approach.

Conduct a Comprehensive Vendor Audit 

As the first step, organizations can begin by reviewing all vendor relationships and analysing spending across various departments, categories, and regions. This helps identify inefficiencies and overlapping services, providing actionable insight into overall procurement patterns.

Contracts should be reviewed for performance, compliance, and alignment with current business requirements. This process helps identify redundant vendors. It also reveals areas for cost savings or process improvements. 

Segment and Prioritize Vendors 

Vendors may be grouped based on their long-term strategic importance and impact on business operations. They can be classified by spending level, performance metrics, and risk exposure.

Separating high-value vendors from those with limited strategic relevance or duplicates is essential. Decision makers should prioritize categories with fragmented sourcing or high spending to maximize the impact of consolidation. 

Establish a Preferred Vendor Framework 

A consistent framework improves the management of preferred vendors and supports long-term procurement goals. Clear standards should guide vendor evaluation on quality, pricing, reliability, and compliance.

Use standardized agreements with clear service levels and contract terms for selected vendors. A phased rollout helps manage consolidation effectively, ensuring timelines and communication stay aligned across all stakeholders.

Implement Centralized Governance 

Centralized governance ensures ongoing performance management and reduces risk across vendor relationships. Tracking vendor performance using KPIs and clear service-level deliverables, and regular performance reviews is an effective way to proceed.

Due to the highly dynamic nature of global businesses, companies must always have contingency plans to address service disruptions or crisis situations. When laying down the governance structure, it is essential to define responsibilities and maintain overall control to ensure accountability. 

Risks and Mitigation Strategies

Vendor consolidation improves efficiency but also introduces operational and financial risks. Key risks include:

• Weakened negotiation power from fewer vendor choices 

• Lower innovation and flexibility from a smaller supplier base 

• High transition costs related to contract exits and system changes 

• Over-reliance on vendor performance may affect service continuity 

• Vendor lock-in limits future switching ability 

• Increased operational vulnerability may be a result of single failure points

To balance consolidation benefits with resilience, organizations can use these mitigation steps:

• Keep backup vendors to retain negotiation power 

• Set innovation KPIs and review vendor mix regularly 

• Plan phased transitions with dedicated resources 

• Define SLAs and monitor vendor performance continuously 

• Negotiate flexible contracts with clear exit clauses 

• Develop business continuity plans with backup vendors

Success Measurement

The following measures assess vendor performance and guide better decisions during consolidation:

• Return on Investment shows the value gained through cost savings or efficiency 

• Compliance rate tracks how often vendors meet contract and SLA terms 

• Supplier lead time indicates how quickly a vendor fulfils orders after they are placed 

• Support ticket resolution time measures how fast vendors resolve issues once reported 

• Product or service defect rate tracks the frequency of errors, faults, or downtime in delivered products or services 

• Order accuracy highlights how often vendors deliver exactly what was requested 

• Order capacity checks to assess if vendors can meet the full requested quantity 

• Competitiveness tracks how vendor pricing compares to current market benchmarks 

• Risk exposure assesses potential vulnerabilities in vendor stability, operations, or reputation 

• Innovation measures the added value vendors provide through enhancements, updates, or efficiency gains

Vendor consolidation plays a strategic role in helping GCCs simplify operations. It helps optimize costs and maintain consistent performance. A structured process includes comprehensive audits, vendor segmentation, standardized contracts, and continuous performance monitoring. This approach allows GCCs to enhance efficiency while ensuring long-term operational stability.

A leading multinational beverage and brewing company recently partnered with ANSR to set up a high-performance GCC in India with vendor consolidation as one of the enablers. Within 18 months, the center delivered USD 800 million in value and reduced operational costs by 25% through streamlined procurement and centralized operations. Connect with ANSR to unlock similar value through vendor consolidation and a scalable GCC strategy.