Consortium Buying -- Have You Got the Goods?
Quick, what's often the easiest way to save money while improving internal customer satisfaction inside a company? If you guessed joining a purchasing consortia and selectively implementing a handful of categories that offer savings and other service-based advantages, you'd probably be right. Supply Excellence recently offered up a basic but useful primer on some of the advantages of purchasing consortia (along with some of the steps companies should take to avoid stumbling as they implement leveraged contracts). According to Supply Excellence, "Consortium Bids/Purchases enable companies to leverage their collective size and drive greater savings on the purchase of goods and services ... in the case of a consortium, the relative size of the purchase AND savings is increased, thus making it a very attractive process for buyers and their suppliers." In the Spend Management world, buying consortia can take many forms. Some marketplaces (e.g., Enporion) offer consortia and group-buying services as an adjunct to software and professional services delivery. While GPOs such as Corporate United base their entire business model on the leveraged sourcing / group buying concept. Which is right for you? Most likely, you owe it to yourself to investigate all of the options. But most important, it's critical to evaluate existing leveraged contracts on a category-by-category basis.
- Jason Busch
- Jason Busch
Most, if not all, examples I've seen of consortia implementation have required a fair share of that ever-so-fun principle: change management. Consortia/GPO's are usually utilized when there is virtual anarchy, with end users buying from whomever they want. Then, all of a sudden, they are asked to drop their "favorite" suppliers and start using a supplier that they - and their company - had no say in selecting.
Now, let's not get this confused with the value of GPO's. GPO usage is indeed often an easy way to save money. But I've never heard end-users (e.g., the admins responsible for buying office supplies or their managers who want happy admins) chanting G-P-O. G-P-O. G-P-O.
Of course, I've not seen everything there is to see. So I could be way off base. My eyes are open.
Comments like “Consortia/GPO's are usually utilized when there is virtual anarchy, with end users buying from whomever they want. Then, all of a sudden, they are asked to drop their "favorite" suppliers and start using a supplier that they - and their company - had no say in selecting” seem (to me anyway) to be at best sweeping generalizations and at worst badly uninformed.
I have worked in various forms of third-party procurement services for a decade, dealing with companies across industries and across the globe and I have yet to encounter the free-for-all atmosphere describe above. Not only are these not the environments in which GPOs are “usually utilized,” the point that they would fail in such a context is lost on me. If virtual anarchy was the playing field to begin with, strategic sourcing, e-sourcing, e-procurement, contract management, spend visibility, spend analysis, and nearly every other form of third-party procurement services support would also fail.
Furthermore, whenever a company sources a requirement using any method there is a chance that the stakeholder will be asked to use a new supplier. That’s not unique to GPOs, that’s called supply chain management.
Finally, the statement that a company or stakeholder had no say in selecting suppliers utilized by a GPO shows how little Can’t Say I’ve Heard has, in fact, heard. If you are truly curious about the actual ins and outs of these models I would be more than happy to spend some time on the phone with you. I would take the time to elaborate more here, but I suspect Jason’s readers would be bored. DBC