On a previous vacation, my wife and I visited the Niagara Falls.  We went to the foot of the Falls on a tour boat and witnessed their awesome power and majesty.  They hit the bottom with so much force that they produced a perpetual mist around the bottom requiring all of the people on the boat to wear ponchos to stay dry.  As I reflect back on that day, it occurred to me how much power must be generated by the Falls.  It turns out that Niagara is the biggest electricity producer in New York State generating 2.4 million kilowatts a year.  The New York Power Authority’s website states “this low-cost electricity saves the state’s residents and businesses hundreds of millions of dollars a year.”   (www.nypa.gov/facilities/niagara.htm)

There is no doubt that when the awesome purchasing power of a strong buying group is properly harnessed, it, too, can save its members millions of dollars a year, collectively, if not individually.  This series of articles will provide some suggestions of how to go about doing just that.

Having a viable purchasing program requires skillful efforts on two fronts, almost simultaneously.  The first front is with the members of the group.  Simply put, the group will need to get them rowing in the same direction in order to effectively negotiate with its vendors, the second front.  In order for a purchasing program to be effective as to any given product line, several key elements must be present. These include:

(a)       At least two or three strong competitors offering a comparable product.

(b)       The product line offered by each of these competitors must be of a high quality and reasonably interchangeable with those offered by the other competitors.

(c)       The vendor must be able to service the entire group with a high rate of shipping performance.

(d)       The vendor must be willing to sell to all of the members of the group upon the same terms and conditions.[1]

(e)       The members must have the ability and willingness to drop one vendor’s line and go with the line of another vendor in order to support the group’s program.

If a group cannot put most, if not all, of these elements together as to any given product line, the program will have a difficult time in succeeding.

In the next installment, we will offer some suggestions as what a group can do to meet the challenges of the first front discussed above — uniting the purchasing power of the group.


[1] In the real world, what typically happens, is that the vendors may offer a better deal to their very best customers in the group.  Usually there are no complaints about this practice, as long as the entire group is getting a better deal than what they would otherwise receive from that vendor.