This post is an excerpt from Ron’s most current White Paper titled The Art of Collaboration
Retail collective buyer organizations and consortiums have evolved primarily in order to compete with the mega retailers and category killers in support of independent retailers.
These business structures have been around for a long time. Many have evolved to use cutting edge negotiation and procurement tools. Their retailer members are also benefiting from the use of these tools in order to reduce their net landed costs in many different ways.
These types of organizations can go by many different names, such as wholesaler, collective buyer, consortium, cooperative, share groups, and more. Even large Private Equity Companies that control very large portfolios of vastly disparate companies have adopted these methods and they all have one thing in common; they endeavor to consolidate purchasing volumes for a wide array of business structures to try and compress or contain cost in order to improve financial performance.
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 or category. Examples can come from direct or indirect spend and can be as specialized as safety equipment and technology or a wide variety of specialized sectors like legal services.
Buying groups and consortiums are also evolving and beginning to focus on mixed markets where it makes sense. Historically, these groups tended to be vertically focused, such as a drug industry consortium with the members generally representing the drug industry only. Some consortiums are beginning to market themselves outside of their vertical to retailers or other companies who want to take advantage of learned expertise in the categories that are common across more than their own vertical and offer increased volumes. An example of this might be drug stores sourcing very similar products that health care organizations such as hospitals source. Although this may seem like a stretch for most, it is now very common within retail for non-vertical specific players to work together.
Today’s advanced e-negotiation or e-procurement tools, such as the SafeSourceIt™ eProcurement family of products, make it much easier to accomplish collective buying and aggregating outside of a consortium’s initial area of expertise. Large and small retailers alike now have the capability of viewing a much broader universe of suppliers through the use of supplier databases, like the SafeSourceIt™ Global Supplier Database, 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 did not know about and could not have competed for in the past.
All companies should ask their respective collective buyer organizations how they plan to make use of today’s advanced procurement tools, many of which are cloud based and offered in the form of Software as a Service (SaaS), which means they can be deployed almost immediately with no IT involvement and with extremely attractive ROI’s. They should also ask what the GPO has to offer in terms of introductions to other companies beyond their current group for increased collaborative aggregation volume. This is also a significant benefit that eProcurement solution providers like SafeSourcing Inc. can assist with.
If you’re serious about reducing your cost of goods and services please contact a SafeSourcing Customer Services Account Manager and ask about our risk free trial
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