A purchasing cooperative is a member-owned, member-controlled organization devoted to purchasing and other supply-chain issues. Traditionally, purchasing cooperatives help their members lower their costs by aggregating their collective purchasing power, thus keeping them competitive with larger competitors.
In simple terms, independent businesses within a common vertical – such as HVAC distribution, restaurant supply, building materials retail, flooring retail, electrical distribution, etc. – come together to negotiate collectively with their suppliers. By negotiating collectively, each business effectively approaches each of their suppliers not with their own individual purchasing power, but with the purchasing power of the sum of the cooperative’s members.
For example, a “mom and pop” sporting goods store on its own does…
Sales Cooperatives?
Would the idea of a “sales co-operative” be that crazy?
For decades, purchasing co-operatives have flourished, giving independent businesses economies of scale to get lower costs from suppliers. In a traditional purchasing cooperative, independent businesses, who might otherwise be competitors, agree to negotiate together with their suppliers to achieve better terms, lower costs of goods, and, most typically, higher rebates. Over time, some purchasing cooperatives have expanded to provide additional services, such as centralized billing, marketing, private label products, product training, and a host of other services or functions too cumbersome or expensive for an individual business to do on their own.
The effective use of technology is crucial for buying groups and purchasing cooperatives. Without a sound tech strategy, groups risk becoming stagnant. They risk seeing their members become disengaged and eventually leaving to a rival group.
This book was written to help buying groups and purchasing cooperatives develop a technology strategy that will help them successfully serve their members.
Spend Analysis and Rebate Negotiations for Buying Groups
Do you know how much, and how often, your members spend with a specific supplier? The answer to that question is key to negotiating a fair and realistic vendor buying agreement with your vendors. When it comes to supplier negotiations, the power balance in the supplier/group relationship has always favored the former. For groups looking to optimize their members’ rebates, vendor spend analysis data is key to the success in re-balancing that equation.
Most buying groups and purchasing cooperatives lack comprehensive real-time insights into what their members’ purchase. The same is often true of your suppliers – they often don’t recognize the full buying power of your group. That’s why accurately presenting spend analysis data is vital to improve buying groups’ negotiation of supplier contracts as well as improve their relationships with suppliers.