Supplier analysis, for a small business, is not market research. It is looking at the list you already have and finding out what is on it, which is usually a surprise. Companies that think they have forty suppliers commonly have two hundred, most of them tiny, several of them duplicates in the same category bought by different people. This page is about the three cuts of that list worth making, what supplier consolidation actually saves and what it costs, and how the scorecard on this site decides between two suppliers once the analysis says a category has too many.
The three cuts worth making
By spend, to find where the money is: in most small businesses a small handful of suppliers carries the large majority of spend, and the long tail is where the unmanaged risk sits rather than the money. By category, to find duplicates: two or three suppliers doing the same thing, usually because two people each brought their own. And by ownership, to find the suppliers nobody owns, which is the list that predicts every document you cannot produce. Those three cuts can be made in an afternoon from an accounts payable export, and they change what the record is for.
What supplier consolidation actually saves
Less than the pitch and more than nothing. The price saving from moving volume to one supplier is real but usually modest at small-business scale, since the volumes are not large enough to move a rate card much. The saving that is reliable is administrative: fewer suppliers to onboard, fewer documents to chase and keep unexpired, fewer relationships nobody owns. That saving is proportional to the count you remove from the long tail, not to the spend you move, which is why consolidating the tail is often worth more effort than renegotiating the top.
What consolidation costs, and the risk it adds
Concentration. Moving a category to one supplier means that supplier's failure is now your failure with no second source, and for anything the business cannot operate without, that is a real trade rather than a free saving. The honest rule is to consolidate the tail aggressively and the critical categories carefully, keeping a second source where an outage would stop work. A scorecard tells you which supplier is better; it does not tell you whether to keep only one, and treating it as though it does is the mistake this page exists to name.
From analysis to a decision
Analysis produces a shortlist of categories with more suppliers than they need. For each, the decision is between named alternatives you already use, which is exactly what the free vendor scorecard is for: four to six criteria, weights set before scoring, two suppliers compared on your own experience rather than against a benchmark this site does not hold. Record the decision and the date against the record, because the question comes back annually and next year's version of you will want to know what was decided and why.
Questions people ask about supplier analysis
How do I start a supplier analysis?
Export twelve months of accounts payable and cut it three ways: by spend, by category and by who owns the relationship. Most small businesses find far more suppliers than they expected and several duplicates in the same category.
Does supplier consolidation save money?
Some, but the reliable saving at small-business scale is administrative rather than price: fewer suppliers to onboard, chase documents from and keep owned. Price leverage needs volumes most small businesses do not have.
What is the risk of consolidating to one supplier?
Concentration. For anything the business cannot operate without, a single source means that supplier's outage is yours. Consolidate the long tail hard and critical categories carefully.
How do I choose between two suppliers I already use?
With a scorecard: four to six criteria drawn from what goes wrong in that category, weights agreed before any scoring, and the two scored against each other rather than against an industry standard.