Buying Groups – The Price of Everything, The Value of Nothing?

Many organisations, public and private sector, educational, charity or company, use a buying group, buying consortium or Group Purchasing Organisation (GPO) in the UK. They provide useful savings over and above those available to the individual organisations and help towards cost reduction but, other than cheaper prices, do they add value to an organisation or do they just straight-jacket it?

 In China, they call it “tuangou”. A group of consumers agree a date and time to purchase one particular item, to a given specification on the internet and hope that their collective buying power will encourage the supplier to offer a discount. Corporates, educational establishments, government organisations and charities may think using a buying group feels not dissimilar. If the organisation buys this particular biro in that particular colour, and has it delivered on a Wednesday, because that’s when the supplier to that buying group is delivering in that area then they may be able to get it 20% cheaper. The advantage? Bulk buying power delivers cheaper prices. The disadvantage? The customer gets funnelled to a narrow range of goods, through a narrow range of suppliers, neither of which might exactly suit the customer…but it is cheaper.

 In the words of Brian; “We’re all individuals”. Every organisation has different needs. Not everyone needs a blue biro delivered on a Wednesday. Sometimes we need a black one on a Tuesday, or perhaps we would be better having a pencil delivered on Monday this week a green felt tip pen on Friday and nothing the week after.

 Companies realise that the route to higher profitability doesn’t just lead down the road of “buying cheaper” but “buying smarter”. A review of spending categories, identifying wasteage in the buying process, getting closer to suppliers, so they understand and adapt to your needs as a business, encouraging stakeholders to think about how they buy, checking that suppliers have delivered on promises (literally and metaphorically) and then, seeing if you can find a supplier who sees your business as an individual, but prices it’s product at keen rates are all essential processes to ensuring best practice in procurement.

 Along the route other things should be taken into account, green and ethical compliance, how does it fit into our organisations processes? Can we improve those processes? Only one of these issues is addressed by a typical buying group. Buy cheaper. The rest is up to you, and to benefit from the buying group, it all has to be fitted into their framework of product and their suppliers’ ways of working.

 At Expense Reduction Analysts we work with our clients to understand their business and the way that works for them. Our experts analyse the procurement process and see if there are more suitable ways to buy. We work at all levels in the organisation to tailor a method of purchase that not only delivers cheaper prices, but works for the organisation. Our knowledge of the market ensures that organisations work with suppliers that will adapt to our clients needs. We ensure that the suppliers work with the client to deliver the exact product our client wants, when they want it, and where they want it. We also ensure compliance and when mistakes happen, that they get rectified immediately. Oh, and buying power? We currently manage around half a billion pounds of costs for our clients in the UK.

 So even if you currently use a buying group, it will be worth getting us in to look at the processes. We regularly review costs and purchasing at organisations that already use a buying group and identify further cost savings through better procurement. It doesn’t cost you anything for us to have a look, and we only get remunerated on any cost savings we identify and action.

 It takes an awful lot more than two to tuangou, and you’ve just got to hope they’re all dancing to the same tune.