The Hidden Cost of Managing Too Many Manufacturing Suppliers
Manufacturers are using more suppliers than before. The RS/CIPS Indirect Procurement Report 2025 found that businesses are using 18% more suppliers, while MRO expenditure has increased by 20%.
More suppliers can reduce reliance on a single source and give manufacturers access to different capabilities. But every additional supplier also creates more quotations, purchase orders, invoices, contracts and communication to manage.
The real question is not "How many suppliers should we have?" It is "When does another supplier add value, and when does it add unnecessary cost and complexity?"
Where Supplier Complexity Starts to Cost Manufacturers
Having multiple suppliers is not automatically a problem. It becomes an issue when procurement teams spend increasing amounts of time managing suppliers, while gaining little additional value from them.
For example, five suppliers providing five different specialised components may be necessary. Five suppliers providing similar standard parts may create unnecessary administrative work.
This hidden cost becomes clearer when looking at how much work sits behind each purchase.
3 Hidden Costs of Managing Multiple Suppliers
1. Every Purchase Has a Cost
The cost of buying a component is more than its purchase price.
A purchase can involve quotations, approvals, purchase orders, delivery coordination, invoice processing and issue resolution.
The RS/CIPS Indirect Procurement Report 2025 estimates that the average business spends £89 per order — approximately S$151 at the time of writing.
Even more importantly, 59% of procurement teams do not know their actual processing cost.
For manufacturers handling hundreds or thousands of purchases, these administrative costs can quickly become significant.
2. MRO Creates Disproportionate Procurement Work
MRO — Maintenance, Repair and Operations — shows how purchasing volume can become disconnected from spending.
According to CenterPoint, MRO can account for only 5–10% of a manufacturer's cost of goods sold, while generating 70–80% of all procurement transactions.
That means MRO may represent a relatively small share of manufacturing costs while creating a very large share of purchasing activity.
When these purchases are spread across many suppliers, procurement teams may have less visibility over:
What they are buying
How much they are spending
Which suppliers provide similar items
Whether purchases follow existing contracts
Where consolidation could make sense
The result is more purchasing activity without necessarily creating more value.
3. More Suppliers Can Mean Less Visibility
Supplier complexity also affects how much manufacturers know about their supply chains. McKinsey's 2026 analysis found that more than 90% of surveyed companies had visibility into their direct (Tier 1) suppliers, but less than half had visibility into Tier 2 suppliers further upstream.
The further down the supply chain a company looks, the less visibility it may have.
This matters because weak supply chain transparency can lead to higher costs, larger inventory buffers and reduced cash flow, according to McKinsey.
More suppliers do not automatically create more risk. But managing a larger network without enough visibility can make risks harder to identify and respond to.
Should Manufacturers Reduce Their Number of Suppliers?
Not necessarily.
Supplier consolidation can reduce administrative work when multiple suppliers provide similar products or services.
For example, if five suppliers provide the same standard component, a manufacturer may be able to work with two or three reliable suppliers instead. This can reduce the number of purchase orders, contracts and supplier relationships that need to be managed.
However, reducing suppliers too aggressively can create dependency on the remaining suppliers.
For critical or specialised components, maintaining alternative suppliers may be important for resilience.
The OECD Supply Chain Resilience Review 2025 highlights this trade-off: diversification can improve resilience, but it can also increase complexity.
The goal is therefore not to have the fewest suppliers.
It is to have the right number of suppliers for the products and risks involved.
How Manufacturers Can Reduce Supplier Complexity
1. Identify Where Suppliers Overlap
Review the supplier base by looking at:
Total spending
Number of orders
Products supplied
Lead times
Quality performance
Supplier location
This can reveal where several suppliers are providing similar products or capabilities.
2. Measure the Cost of Procurement Activity
Do not only track the price of the product.
Track:
Number of purchase orders
Processing time
Cost per order
Contract compliance
Supplier performance
This helps identify where procurement teams are spending time without creating proportional value.
3. Consolidate Routine Purchases
Where several suppliers provide similar standard parts or MRO items, consolidation may reduce purchasing activity and improve visibility.
However, critical or specialised components may still require multiple suppliers.
4. Improve Supplier Visibility
Manufacturers should be able to quickly understand:
Who supplies each product
Where it is produced
Whether orders are on schedule
What capacity is available
What alternatives exist
Better visibility makes it easier to decide which suppliers to keep, consolidate or add.
How Imajin Supports Manufacturing Supplier Networks
For manufacturers, finding a supplier is only part of the challenge. They also need to know whether the supplier has the right capability, quality and production capacity.
Imajin connects businesses with manufacturing capabilities across prototyping, tooling, production and supply chain activities. For Singapore companies exploring Indonesia, this provides another way to access and evaluate manufacturing partners as their production needs grow.
The key takeaway: supplier diversification can improve resilience, but an increasingly fragmented supplier base can also create hidden procurement costs.
Manufacturers should focus less on simply adding or removing suppliers and more on building a supplier network that provides the right capabilities while remaining manageable, visible and cost-effective.
📩 For further information or collaboration:
Melisa Aprilia
Supervisor of Business & Digital Development
Website: Imajin.id
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