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Archive for April 21st, 2009

Retail collective buyer organizations and consortiums need to evolve.

Tuesday, April 21st, 2009

These business structures have been around for a long time. Many have evolved to use cutting edge e- procurement tools. Do their retailers also benefit from their use of these tools in order to reduce their net landed costs in every way possible?

These types of organization can go by many different names such as wholesaler, collective buyer, consortium, cooperative, share groups and more. They all have one thing in common. They consolidate purchasing volumes for a wide array of groups that may have very similar business structures, but for the savvy consortium can also be wildly different.

In the retail vertical, companies may actually belong to several different buying groups because their primary group does not offer expertise in a certain area.

Consortiums need to evolve and also focus on a mixed market where it makes sense. In general consortiums tend to be vertically focused such as a drug industry consortium with the members generally representing the drug industry only. However some consortiums are beginning to market them selves outside of the vertical to retailers or other companies who want to take advantage of expertise that the consortium possesses in the categories that are common across more than their own vertical and offer increased volumes. An example might be drug stores sourcing very similar products that health care organizations like hospitals source.

Today’s advanced e-procurement tools make it much easier to accomplish collective buying and aggregating outside of a consortiums initial area of expertise. Large and small retailers alike now have the capability of viewing a much broader universe of suppliers and other companies while also coordinating and participating in collaborative events from hundreds if not thousands of miles away. Suppliers now have an opportunity to earn business they could never compete for in the past.

Retailers should ask their collective buyers how they plan to make the use of these tools available to them and what they have to offer in terms of introductions to other companies for increased volume.

We look forward to and appreciate your comments.