In my recent presentation, I discussed an innovative approach to boosting supply chain resilience: joining a purchasing cooperative. With disruptions becoming commonplace, procurement leaders must implement proactive risk mitigation strategies. In this blog, I’ll summarize how cooperative purchasing can strengthen organizational resilience.
Managing Overlooked Spend = Big Savings
Most companies overlook significant value creation opportunities in indirect spend categories like MRO, tail spend, and consumables. While top expenditures receive oversight, the remaining 20% of fragmented, non-strategic spend flies under the radar. Yet this portion still represents millions in potential cost savings. Read more about tail spend management.
By centralizing and optimizing indirect spend through professional procurement, organizations can better control maverick spending and aim for economies of scale. Joining a purchasing cooperative helps rein in rogue purchasing and drives standardization.
Not All Group Buying is Equal: GPOs vs. Cooperatives
In the landscape of sourcing strategies, it’s essential to understand the differences between group purchasing models to optimize your approach:
- Traditional GPOs offer a vast product range and pooled buying power but may lack specialization for niche industry needs. Some also lock members into inflexible contracts.
- Purchasing Cooperatives provide a specialized focus on areas like MRO and FM spares. They offer technology integration for insights, flexible purchasing options, and strategic pricing and benefits.
The Power of Group Purchasing Organizations
By tapping into the multi-billion-dollar combined spend of a cooperative, members gain access to discounted pricing and favorable contract terms individual companies struggle to achieve independently.
Other cooperative benefits include:
- Diversifying the supply base to reduce sole supplier dependence
- Adding supplier redundancy to mitigate sole source risks
- Data sharing for collaboration and insights
- Flexible contracts without minimum spend requirements
Advanced Analytics Enable Risk Monitoring
Purchasing cooperatives apply advanced data analytics for unprecedented visibility into procurement operations. Our supplier scorecard tool allows ongoing tracking of supplier KPIs to detect emerging risks.
With data-driven insights, members can make informed decisions to optimize spending towards preferred suppliers and strengthen supply chain resilience. Scenario testing and simulations help evaluate responses to potential crises.
- Cooperatives enable aggregated buying power and discounted pricing
- They diversify suppliers to reduce sole source dependence
- Members collaborate and share insights for resilience
- Analytics empower risk monitoring and early intervention
- Flexible contracts, redundant suppliers, simulations, and digitization boost resilience
The benefits of joining a purchasing cooperative are multifaceted. I encourage procurement teams to evaluate group purchasing organizations as part of their risk mitigation strategies. Contact SDI to learn more about optimizing indirect spend through cooperative purchasing.