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XYZ Ltd decides to go to market for a cleaning contract to service a number of offices. It knows that it will get a price which may, ormay not, be better than the one it is currently paying. To gain leverage in the marketplace, the organisation decides to add other related services to the scope, such as gardening, security and maintenance, which increase the value of the contract. This is an example of which forms of spend consolidation?
Correct Answer: B
Explanation Buying organisation may increase its leverage with suppliers byconcentrating spend. Supplier spend consolidation can take many forms as outlined below: - Vendor base reduction: straightforward reduction of number of suppliers in any category - Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts - Volume redistribution: making recommendations following spend analysis to move from one supplier to another - Volume consolidation across categories: certain purchase requirements may be common across a number of categories. In the scenario, XYZ has combined different categories but closely related to office services into a larger contract so that they can increase their leverage. - Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations. - Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals. LO 1, AC 1.3