Many companies are reliant on outsourcing suppliers – particularly in industries such as manufacturing, construction and catering. But just how many vendors should you be outsourcing?

Is it better to have access to lots of different suppliers so that you can find the best prices and take advantage of specialist services/products? Or is it better to have a streamlined supply chain that allows you to easily place orders and keep track of costs?

Unfortunately, there is no simple answer – it can vary depending on the nature of your business. There are however a few telltale signs worth looking out for that can tell you whether you should be using more or less suppliers. Below are some of the signs to look out for.

Signs you’re using too many suppliers

There’s no limit on how many suppliers you should use. Some larger companies have hundreds and thousands of different suppliers. However, these companies typically have whole departments dedicated to managing these suppliers – and a much larger budget to work with.

If you’re a small business with lots of suppliers, you could find that at some point managing all of these suppliers becomes a headache. On top of this, it could also start to get expensive. If you regularly forget about suppliers or find yourself regularly missing payments, it could be a sign that you’re juggling too many vendors. A streamlined supply chain could result in less individual costs to keep track of and may even work out cheaper overall.

You should also consider how many of your vendors supply the same product. If you run a factory and order electrical parts from two different vendors, consider whether it would be more sensible to buy all your electrical parts from one supplier – especially if there’s very little price difference between the two.

Signs you’re not using enough suppliers

A lot of new startups rely on wholesalers to offer all the supplies they need. While this allows you to conveniently order all your supplies from one place, you should consider whether you’re getting the best deal for each of your supplies and whether you feel restricted when it comes to options.

With certain products that can range dramatically in price, it’s sometimes better to have access to multiple suppliers so that you can shop around for the best quotes. For example, many construction companies will often switch between two or three timber merchants, allowing them to find the best price per project. Take a moment to shop around to see if you’re being ripped off by sticking with a single supplier.

You should also consider using other suppliers if you feel limited. Perhaps you own a restaurant and you’d really like to sell a specific wine that your supplier doesn’t stock – it could make sense to try another supplier or go directly through the vineyard that sells this specific wine. This does mean expanding your supply chain, but it could be worth it for accessing more unique products.

Finding the optimal amount of suppliers

You should feel as if you have access to all the supplies you need and that you have room to shop around. At the same time, you should be able to easily keep track of all these suppliers and there should be no redundant suppliers. It’s worth taking your time to assess your supply chain so that you can find the optimal amount of vendors.