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As we are all aware, small businesses often cannot obtain the premium pricing that is available to larger companies and franchises. Why?... why because they do not purchase enough alone to warrant the discounts that larger purchasers can obtain. In addition, small businesses typically do not have the time or manpower to compare prices and manage negotiations.
What can be done to change this? The simple answer is to join forces with other businesses like your own, forming a small business purchasing group alliance. Group purchasing provides a way for smaller businesses to regain the time and money needed to grow operations and realize their full potential in the marketplace.
• Negotiating with vendors for cost savings on your behalf
• Soliciting bids and providing easy-reference price comparisons, streamlining your ordering process
• Inviting other businesses to join and increase the purchasing power creating better profits
The concept of group purchasing has existed for decades in different form in different industries.The practice initially started with buyers forming a consortium to strengthen their negotiation position using collective bargaining power and aggregate demand, and to save on miscellaneous transaction costs associated with product and vendor search and evaluation, logistics, contract management, etc. Over time, independent supply chain entities, both for-profit and not-for-profit, have appeared based on the same economic rationale of group purchasing. These organizations do not take direct part in product and payment exchange between buyers and sellers. They establish contracts with vendors on behalf of a group of buyers and act as intermediaries for managing contracts between the buying and selling parties.
A 5% cut in procurement spending would result in a 20% increase in earnings before interest, tax, depreciation, and amortization. Cost management is going to be paramount for companies in terms of differentiating themselves. They have already slashed staff numbers and are increasingly reluctant to cut costs further in areas that might jeopardize their ability to benefit from the economic upturn.