Leveraging Your Buying Power    

PURCHASING CONSORTIUMS--DEFINED

A purchasing consortium consists of two or more independent organizations that join together, either formally or informally, or through an independent third party, for the purpose of combining their individual requirements for purchased materials, services, and capital goods to leverage more value-added pricing, service, and technology from their external suppliers than could be obtained if each firm purchased goods and services alone.

A BRIEF BACKGROUND ON COLLABORATIVE BUYING THROUGH CONSORTIUMS AND CONSORTIUM-TYPE ORGANIZATIONS

Collaborative purchasing among independent organizations certainly is not a new idea. Farmers have had cooperatives, or "co-ops," for many decades with the goal of combining their individual needs to gain purchasing power (as well as marketing power), as have independent grocers, retail hardware stores, and college bookstores, to name a few. To be sure, many of these organizations have been formed to enable them to survive against the powerful purchasing and marketing power of large food chains and general merchandise stores.

In addition, thousands of hospitals in the United States and other healthcare providers have enjoyed favorable pricing and service for many years for medical-surgical-laboratory supplies, pharmaceuticals, laundry, food, maintenance services, and medical equipment. This has been facilitated through the hundred, or more, "group purchasing organizations" (GPOs) such as Amerinet, HSCA, and others, that serve as independent third parties to negotiate with suppliers such as Johnson and Johnson, Abbott Laboratories, Baxter, and other large suppliers to the healthcare industry. In recent years, these GPOs have become an important mechanism for independent hospitals to compete with the dynamic growth of HMOs and national for-profit hospital chains. 

Today, purchasing consortiums can be a valuable strategic initiative worth serious consideration. Moreover, a purchasing consortium is a vehicle through which the purchasing function may add significant value to their respective firms. In addition, consortiums seem to hold the potential for creating a new dimension of "partnering" strategic alliances beyond those of individual buyers collaborating only with individual suppliers. This new dimension, in our opinion, is the formation of horizontal multi-buyer and vertical, multi-supplier strategic "partnering" alliances. It is apparent that many of the critical success factors associated with vertical strategic buyer-supplier "partnering alliances" can be applied to the design and management of horizontal alliances consisting of small groups of like-thinking buying firms. 

Fortune 1000 companies have reported that purchasing through their consortiums saved them about 13.4 percent which yielded an average annual savings of about $2.3 million for each member. * 

As a member of the CPS Purchasing Consortium each member company will be able to take advantage of a direct relationship with the selected supply chain suppliers.  By acting as a third-party "firewall", CPS operates within all Federal guidelines established for joint buying agreements, cooperatives and consortiums.  These legal guidelines can be  reviewed on our legal web page and our frequently asked questions web page can address a variety of questions as well.

The CPS Consortium mission is simple:  Secure the best possible pricing, quality and service on a variety of direct and in-direct products and services.  Join us today to capitalize on your strategic supply chain cost reductions on the following current or pending commodities:  Click here for partial list of suppliers and manufacturers participating in current consortium offering.

For more information please contact us toll free at 800-277-0826 or visit our contact page at your convenience.

* Center for Advanced Purchasing Studies, -Focus Study (Portions of executive summary)