Everyone wants to get the most bang for their buck, especially when it’s the company’s money. While every dollar may have the same inherent value, a dollar strategically spent can procure much more.
A child, for example, takes a dollar to a bakery and leaves with one cookie. Another child comes to the same bakery with a dollar and a two-for-one coupon and leaves with two cookies. The inherent value of each dollar was the same, but the strategy and resources doubled the takeaway worth.
The purpose of this blog post is to make sure your company knows how to maximize your buying power when it comes to making purchases.
Buying power refers to an organization’s ability to access discounts by purchasing a product or service in high volumes. It's common in procurement to find that when purchasing, the more you buy, the cheaper an item will be per unit.
Small or mid-sized organizations that attempt to negotiate a discount with a supplier often find that their request goes unanswered because they do not have enough purchasing volume to warrant a discount.
Oftentimes, even the biggest organizations have varying degrees of buying power across categories. A large printing company, for example, will have significant volume and be able to access great discounts for direct procurement categories like paper and ink.
But when they attempt to purchase something they do not need in high volumes, like a small number of delivery vans, for instance, they lack buying power and cannot access a price reduction.
No matter what industry you’re in, there are things you need to buy to ensure your company runs efficiently and effectively.
Having a strategy in place that will allow you to maximize your buying power is key to saving money in the long run, while bringing value back to your organization.
To get started, run an inventory of your current spend. This can be a daunting process, but it’s necessary to see where your company’s starting point is. Honestly assess all the areas in which your company is spending, down to the candy in your snack drawer.
Once you have an idea of where money is going out the door, step back and ask your team two questions:
Filtering out your company spend should highlight what is considered essential for your company to function, and may even reveal recurring spend with savings opportunities. That filtered list will be a baseline for your vendor requirements.
The next step is to research which suppliers offer what you need and what contract options are available for corporate purchasing. This task may take up a significant amount of time since it could consist of manually searching for and emailing vendors based on available information from websites.
After you have found your vendors, it's time to make sure you are getting the best discount available. Something to note: when making corporate purchases, you don't necessarily have to take pricing at face value. Many times vendors will offer group discounts for corporate partners or national pricing if you request it and qualify. Negotiation is an option to lower prices for your company.
Joining a group purchasing organization (GPO) can be a great option to help you maximize buying power. GPOs leverage the collective buying power of its members to obtain volume discounts from suppliers and retailers. Pre-negotiated contracts offering the best pricing are already in place which saves you money, time and effort.
Compared to a large Fortune 500 company, most organizations spend a small amount in regards to indirect spend. It's likely your organization is paying more for these items because your purchasing volume is lower.
By forming a partnership with a trusted GPO and increasing your own buying power, you can take advantage of larger discounts you wouldn't have been able to negotiate on your own without actually paying - or purchasing - more.
In addition to increased buying power, the benefits of working with a group purchasing organization include:
In the end, working with a group purchasing organization helps your business scale and grow. Additionally, our team can help establish a strategic process for purchasing. Setting the standard for your company’s purchasing can ensure you continue to get the most out of your required spend.
Ready to maximize your buying power? Contact Una to get started. Membership is always free and there are never any purchasing requirements or obligations.
