The Five Worst Reasons Not to Join a Purchasing Consortium

Spend Matters would like to welcome a guest post from regular Spend Matters contributor Lynn Everard, in light of our recently released paper, GPOs and Buying Consortiums Must Be on the Radar for 2011-2012.

While the economy continues to try to find its legs and most people are focused on what is wrong, there are leaders and innovators busy creating the market and leading companies of the future. At this very moment, people and companies are innovating paradigm-shifting products and services, climbing to the top of their own industries. The procurement leaders of the future are busy too. They are taking stock of their supply base, working with their engineers to tweak product designs so they use less of more expensive raw materials, and they are evaluating new savings and value opportunities. In this challenging environment, procurement leaders are also seeking additional strategic competitive advantage, especially around re-evaluating past decisions, moving toward using the input of new information about commodities, markets and global competition.

One opportunity that remains largely untapped is the use of consortiums for the purchase of MRO (maintenance, repair and operating supplies) as well as a number of costly yet important services and employee benefits. In spite of proven savings, many companies and their procurement leaders have simply not taken advantage of the purchasing consortium opportunity. Surely there are many reasons for this situation -- far too many to list here. But of all of the reasons to not join a purchasing consortium, the reasons listed below may be the five worst:

  1. I have it all under control.
    While the country was founded (and experienced a significant part of its growth) through the principle of rugged individualism, going it alone is not always the best idea. With the world changing quickly and procurement staffing limited by the hesitancy of companies to hire in the wake of several economic down years, procurement leaders can do themselves and their companies a service by being open to free help from the outside in the form of purchasing consortiums.

  2. My company is really large so I have all the leverage I need.
    Large companies can have more leverage, but it really only exists in the areas where they have both large volume and deep subject matter expertise. A large metals manufacturer may purchase large amounts of various ores and minerals and have commodity experts on board who can predict every move in the global metals markets. But that does not mean that such a company has a high enough volume of office supplies to drive deeper savings -- and it likely won't have an office supply subject matter expert on staff who could deliver the savings that a purchasing consortium could.

  3. I am a tough negotiator so I don't need any help.
    Being a tough negotiator is clearly a benefit. But no matter how tough you are, it is difficult to improve your negotiating position if the company lacks sufficient purchase volume in specific product and service areas and/or true subject matter expertise in those areas.

  4. How complicated can office supplies be, anyway?
    While some office supply items may not be that complicated, there are hundreds of items made by hundreds of manufacturers. And one category that could be included in office supplies, printing -- including copiers, printers, faxes and scanning -- can be extremely complicated and costly if not managed effectively. And buying new copiers every three or four years won't provide the subject matter expertise to create an optimal cost profile in this area.

  5. I don't want to lose control over any of my categories.
    If you are not paying the lowest possible price for non-core products, how much control do you really have? Or even if you have control in this scenario, that control isn't necessarily maximizing your results.

Every procurement leader knows that every dollar of cost savings goes directly to the bottom line. If your company's bottom line is not all it could be, why not take advantage of the power of purchasing consortiums?

- Lynn Everard, Business and Procurement Specialist

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