Drive Your Own Economies of Scale by Group Purchasing
Drive Your Own Economies of Scale by Group Purchasing
Whether you are an SME business where everyone pitches in, or a larger business who employs a procurement manager and a procurement strategy, the economics are the same - larger volumes to procure equals lowers prices to pay.
The tipping point beyond which your prices can go no lower is very high in almost all areas of supply, so the scope to group your purchasing together to reduce costs represents a big opportunity to all UK purchasing.
But, how can you increase your own purchasing power to access the lower prices available?
The first step is all to do with changing the traditional mindset when it comes to procurement, particularly in the SME sector. In businesses where there is little or no need for a specialist procurement person, where there is no raw material or sizeable strategic costs, the tendency is to pass the role of "buyer" to a junior member of staff. This is deemed to be the best home for such menial tasks, however in passing such financial responsibility to someone, that most probably has little other responsibility in the business, can cause ongoing problems for the business.
Human nature in business is to try and make yourself indispensable as that in turn ensures you peace of mind. If, in a business, you hold a junior position where, apart from a degree of purchasing that you are allowed to dictate upon, you have no other "powers", you are very unlikely to make it easy for anyone to be critical of the job you do. So why on earth would you want to pass your only area of responsibility to an external body, and leave yourself shorn of your job safety blanket?
This issue can easily be resolved by a member of the business hierarchy keeping hold of the procurement purse strings, but not necessarily getting bogged down in the mundane day to day tasks the purchasing can bring. Retaining such a hold can ensure that the business, as a whole, can take an objective view of using a third party to combine their existing purchasing with numerous other similar size businesses to maximise buying power, and minimise overhead cost.
The second step you need to take is to maximise your own buying power - why try and use external help when you have not already done what you can do internally. This is explained in greater depth in a previous post - Cost Reduction Rule #1 - Maximise Your Own Buying Power
The third step to gaining an economy of scale for your business is to talk to other businesses you are close to. Is there anything you can procure together? Are you in a business club or network where you can maximise the volumes you jointly buy?
The fourth and final step tends to follow from Step 3, where a lack of resource, and the lack of a suitably qualified "link" between the businesses, can cause any such joint ventures to fail. An external body that specialises in combining the expenditure of multiple businesses can take the pain out of creating your own buying consortium. As well as providing your group with expert procurement skills, the fact that they are a third party can ensure that the consortium is run on a fair, and non-bias basis, ensuring longevity of your group.
We are at a point where most businesses have reduced their cost base as much as they can do on their own. To continue to grow more lean businesses must look at their current procurement strategy and see where group purchasing can assist them. Refinishing Oak Cabinets With Style Tips to Attract Women - 3 Must Know Tips If You Want to Date More Women Making Marriage Perform, Part 1 What Is The Best Home Business Online? Logo Design Tips And Tricks For Logo Buyers Discover Great Indoor Happenings For Kids On A Holiday Staying In Hotels Central London The many Benefits Of Online Stock Brokers Trade scale - at the heart of your operations Learn About Power Of Conversational Hypnosis Online India Tours Spend Thrilling Holidays In Incredible India Pest Control London The Importance of Insurance While Visiting the US Wedding Cufflinks- Make Them More Personal!