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Benefits of an Industrial Equipment and Supply Buying Consortium


October 30, 2019 Facebook Twitter LinkedIn Google+ News


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Centralized purchasing makes it easier to combine needs and leverage strength. When you work with a buying consortium, individual purchases can access better pricing, services, and technologies than they would otherwise because there is more power to negotiate.

 

You still receive the exact item that your project requires, including the manufacturing brands you prefer. The only difference is that you get to work with our team to gain access to better rates instead of trying to negotiate that outcome by yourself.

 

There are several additional advantages to consider with a buying consortium if you are in the market today for industrial equipment or supplies. This guide will take you through each of the benefits to help you see if forming this relationship is the right step to consider for your organization.

 

Why Choose to Work with a Buying Consortium?

 

When you have good procurement practices, then your processes encourage higher levels of accountability. Every stakeholder understands that you’re working toward equity and fairness when initiating a transaction. This audit trail allows you to provide evidence that you’re working to improve your approach to each project.

 

If there are regulatory requirements that you must meet, then it can be easier to reach your intended results because you can prove that you’re remaining in compliance.

 

  1. Economy of Scale

Purchasing groups make it possible for individual small businesses to group under one overarching umbrella. This advantage allows for the volume of aggregated purchases to operate on the same economy of scale that the most significant companies use to keep costs low. That means your money has greater purchasing power when it is used together with your peers instead of trying to do everything alone.

 

  1. Lower Prices

Pricing is not always guaranteed when working with a buying consortium, but there are usually savings to be found. When considering industrial equipment or supplies, the average amount is about 10% to 35% lower than what a company would pay when acting alone. Having more power to negotiate also means that you can see these savings even if you don’t have a powerful internal sales program. You can place your order and then wait for the delivery.

 

  1. Reduced Transaction Costs

Joining a buying consortium means that your procurement expenses can start going down. That means your per-unit costs and what you pay for each transaction. This advantage occurs because there are fewer relationships to manage and contracts to negotiate and prepare.

 

  1. Redundancy Elimination

If a group of companies can come together to start sharing information about new vendors, technologies, or market knowledge, then supply chain redundancy disappears. Working independently forces each small business in the same industry to go through similar time-wasting processes to maximize their efficiencies. When you can work with one organization or come together as a group, then every past purchasing experience has more value for everyone.

 

  1. Less Work

If you choose a buying consortium to manage your industrial equipment and supply needs, then the process is similar to an online checkout. There are a few more steps to consider since there are some high-value assets in the portfolio, but you do get to leverage the advantage of having less work. That means you can spend time focusing on your core business needs instead of working on sales, contract negotiation, and asset acquisition.

 

  1. Improved Best Practices

Being part of a buying consortium or purchasing group gives you the option to share and receive best practices developed over time. Industry experts for each product or equipment asset provide data about the items they manage, searching out more efficient ways of completing projects. The improvements made to the Total Cost of Ownership can be profound since you’re using optimized processes at better overall prices.

 

  1. Positive Profit Impacts

If you can reduce your purchasing costs by 5%, then there is a profit increase of about 2% that occurs. When you want to achieve that result through direct sales only, then you might need to push your prices higher by 20% or create that amount of growth in the number of transactions you process. The savings generated by purchasing centralization creates a rising tide that helps everyone find more success.

 

  1. Budgeting Improvements

Your annual budget is an essential component of your organization’s existence. Do you have a 3-year plan that you’re following? What would happen if you extended your forecast to five or ten years? When you work to improve the value of each purchasing relationship, then it is possible to start maximizing the financial outlook of every project – and your company.

 

Different Types of Consortiums to Consider

 

When you can find the right relationship, then you are working with a partner who understands the requirements of your business. That means your need for industrial equipment and supplies becomes a proactive component of your organization instead of one that is reactive.

There are several different buying consortiums that you can find operating under multiple classifications. Five of them are relatively common around the world.

 

Loose collectives are the most common option. This local network involves 2+ organizations working together to create informal leverage during the contract negotiation process.

 

A voluntary cooperative creates a structural relationship to meet competitive sourcing needs. This option usually receives guidance from an informal committee. Some groups might incorporate formal components to enhance the management aspects of the arrangement.

 

Regional agencies offer a centralized authority. It provides services through or to government agencies, with leverage handled through a single voice.

 

The fourth option is a member-owned bureau that creates a separate entity. This process usually requires a Board of Directors made up of the leadership teams of each company in the relationship. There is more independence with this consortium, but there are some ties to the founding members.

 

For-profit consortiums work to create revenues through their negotiation efforts. This money can be kept internally or distributed through the membership. It purchases goods on behalf of their members, and then resells them or provides direct inventory for a commission.

 

It is this final option that tends to work best for small businesses that are still in the startup phase. The costs of a for-profit consortium may be a little higher than the other choices included above, but it also limits the organization’s responsibility to the collective. You can engage in a sales process whenever it is convenient for your specific needs.

 

What Are the Goals of Joining a Buying Consortium?

 

When you combine the individualized requirements of each organization for the industrial equipment or products needed to complete projects, then you create more leverage. The relationships you form with Industrial Man Lifts or similar providers can be formal or informal. You can even work with us through a third-party provider if you prefer.

 

The goal of joining or working with a buying consortium is to start saving money. When you can accomplish that outcome while still meeting delivery demands, then your existing revenue lines become more profitable.

 

If your procurement processes are efficient, then you can minimize the risks you face. There is more time to build relationships and find new customers. You will find yourself in a position where you’re procuring the correct products to produce the best goods, services, or project outcomes.

 

We can help you to deliver at the right time and place for the best available cost.

 

Are you leveraging these advantages to benefit your business? If not, then let us become your industrial equipment and supply buying consortium.

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