Collective Power Of Procurement

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Author: think Procurement

Picture being able to quickly identify the best products for your business, then establish purchasing contracts with reputable suppliers to buy these products – all with maximum purchasing power and confidence you are getting the best price.

Seems like a pretty picture – but how do you achieve the above with limited time, skills and resources? How can you get access to the best prices from the best suppliers, when your purchasing cycle is sporadic and the volume is not that high?

One potential solution is group purchasing.

Group purchasing, also referred to as co-ops, collective buying, procurement groups and purchasing alliances are designed to provide shared benefits and reduced risk along with improved contract terms. By leveraging the collective purchasing power of multiple organisations, group purchasing organisations negotiate on behalf of its members to deliver the lowest price and greatest value.

Group purchasing is a common tool which has benefited a number of businesses from most industries. Its origins lie in the US healthcare industry, where in the early 1900’s healthcare providers realised that by banding together they could drive down supplier costs, achieving savings of up to 18%.

Regardless of the industry, the real benefit of group purchasing is giving small businesses the power to buy like the big guys. For these types of business, negotiating reduced pricing from reputable suppliers can seem like an exercise in futility. But group purchasing is a direct way to gain better pricing and access to resources that might not otherwise be offered to the individual. Furthermore, internal costs associated with vendor evaluation, tender processes, negotiating contracts and account management are also cut. This means that even small purchases can achieve savings from day one.

Group purchasing is not only favourable to small-to-mid-sized businesses. Challenging economic conditions have led large organisations to try alternative methods such as collaborative sourcing in their quest to reduce costs. In 2009 PepsiCo and Anheuser-Busch InBev made headlines by announcing plans to jointly purchase indirect goods and services to “purchase more efficiently at competitive prices”. A team of procurement experts from each company concentrated on mutual areas of spending and negotiated purchases on behalf of both companies to obtain higher discounts.

Group purchasing organisations can mitigate risk by using experienced sourcing professionals to negotiate beneficial contract terms and conditions for its members. This is highly valuable when organisations lack the time, resources or skill to do so themselves. There is also greater security in knowing reputable and trusted suppliers are engaged and avoids the problem that may arise in pursuing low prices, where quality can be compromised.

The benefits of group purchasing are further enhanced when integrated with a digital procurement software, such as the one offered by think procurement. Think’s procurement platform offers all the benefits of a group purchasing organisation, in addition to a full suite of procure-to pay features. Think’s team of procurement experts have been able to deliver the best price for a range of everyday products due to having the power of the collective behind them. This means those individual companies that would usually struggle to gain access to bulk or discounted pricing now can, due to being part of the collective whole. The system is continually evaluating its supplier catalogues against market prices to ensure that value is being achieved – whilst providing a feedback loop with customers to ensure quality is maintained.

The procurement platform also provides the benefits of:

  • One platform to conduct all your business purchases
  • Manage spend across your organisation
  • Automated ‘purchase order’ to ‘invoice’ to ‘receipting’ (3-way reconciliation)
  • Approval and delegation workflows
  • Budgeting and cost centre allocation
  • PCI compliant payment gateway
  • Insights into what you are buying, where and when

But potentially the biggest advantage of think’s procurement platform is that it also allows users to bring their own suppliers and catalogues to the platform. For those companies with bespoke needs or existing long-standing relationships, the think platform can upload supplier content (at your negotiated contract prices) so that you can continue to purchase as you currently do. This means you can not only get access to think’s pre-negotiated product range but also have your pre-existing product catalogues uploaded for your specific needs – all in the one intuitive and easy to use platform. Essentially, the think platform acts more like a part of your procurement team and augments your functionality and potential efficiencies.

With the ever-prevalent mantra of “do more with less” – being able to tap into a group buying concept within an automated procurement environment is the smart way forward. By utilising think’s pre-negotiated product range or bringing-your-own content, there are many direct and indirect savings to be made. Overlay the control and security aspects inherent in a typical P2P platform and think’s modular pay-as-you-go approach, any business of any size can get started and begin realising these benefits immediately.

To find out more about how your business can realise the collective power of procurement – get in touch here.

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