In short: Reducing your supplier base means cutting the number of active suppliers in your ERP, mostly in the long tail of small and one-time suppliers. The most effective approach is to analyse your spend, split suppliers into segments, keep strategic suppliers direct and move the tail to a single creditor. Employees can keep buying from the same suppliers, while your ERP holds one creditor instead of hundreds.
Why fewer suppliers matters
Every active supplier comes with fixed work: a vendor record, bank details, VAT and compliance checks, invoice matching, payment runs and follow-up. That work is the same for a supplier you pay once a year as for a supplier you pay every week. In most large organisations, the majority of suppliers sit in the tail, while they represent only a small share of spend.
A smaller supplier base means less administration, fewer payment risks, cleaner master data and more time for procurement to work with the suppliers that really matter.
Step 1: Collect 12 to 24 months of data
Export, per supplier: total spend, number of invoices, number of purchase orders, cost centres and the date of the last invoice. Twelve months is the minimum; 24 months shows which suppliers are truly recurring.
Step 2: Split your suppliers into segments
- Strategic suppliers: high spend or critical to operations.
- Important suppliers: regular purchases, often worth a framework agreement or catalogue.
- Tail suppliers (C-suppliers): low spend, a few invoices a year.
- One-time suppliers: used once, often for a spot buy.
Step 3: Decide what to do with each segment
Strategic and important suppliers stay in your ERP, with contracts, catalogues and direct e-invoicing. Tail and one-time suppliers are the ones to consolidate. Suppliers without any invoice in the last year can usually be deactivated.
Step 4: Move the tail to a single creditor
With a single creditor, employees still order from any supplier they need. The supplier delivers to your company but invoices the single creditor, which pays the supplier and invoices you with one digital invoice per purchase order, through Peppol or another channel you choose. The supplier no longer needs a vendor record in your ERP.
Step 5: Stop new suppliers from coming in
A one-off clean-up does not last if new vendor records keep being created. Agree on a simple rule, for example: new vendors are only created for strategic categories or above an agreed annual spend. Everything else, including spot buys, goes through the single creditor.
Step 6: Measure every quarter
- number of active suppliers in your ERP;
- number of new vendor records created;
- number of supplier invoices processed;
- share of spend with strategic suppliers.
Common pitfalls
- Limiting choice too much: if employees cannot buy what they need, they find a way around the process, and maverick spend grows.
- Treating it as a one-off project: without step 5, the tail grows back within a year.
- Ignoring the users: explain why the process changes and keep ordering simple.
Frequently asked questions
Does a smaller supplier base mean less choice?
Not with a single creditor. Employees can still buy from any supplier; only the number of suppliers in your ERP goes down.
Which suppliers should stay in our ERP?
Strategic suppliers and suppliers with many invoices a year, where a direct relationship, contract or catalogue adds value.
Is this only relevant for large organisations?
It matters most for organisations with hundreds or thousands of active suppliers, where the administrative cost of the tail adds up quickly.
Read more about supplier consolidation and how a single creditor model cuts AP costs, or talk to us about your tail spend.
