Is cooperative purchasing too successful?
Cooperative purchasing has certainly been implemented successfully. Now I am wondering aloud: Is it too successful?
At least in some regards, I think the answer is “yes.” Looking back 10 to 15 years ago before cooperative purchasing agreements as we know them today, I remember how frustrating it was to try to get the best prices for our customers. We certainly did not have the resources to bid everything. At the same time, we were constantly dealing with dozens of vendors, each claiming that they had the best available pricing.
The advantages of cooperative purchasing agreements are numerous. They save buyer time, take advantage of group buying power, optimize purchase card spend and provide predictability for future budgetary considerations. However, cooperative purchasing has been so successful that the bandwagon is overflowing with agreements. For example, look at the myriad of cooperative purchasing entities represented at the vendor event at the last NIGP Forum in San Antonio. Or just take a look at the latest edition of GoPro to see several different cooperative purchasing entities, each with their own set of “competitively bid contracts.”
Office supplies through cooperative purchasing entities provide a classic conundrum for the purchasing professional. It is well known that the competitive marketplace for office supplies has devolved into a world of four major players who compete nationally for market share. And guess what? You can find any one of the four available nationally through one or more the cooperative purchasing entities. In fact, one entity has two of the major office suppliers on their contract.
There are over 100,000 different office supply SKUs in existence. This is because there are literally dozens of choices for the same type of item; some are name brand and some are branded by the office supply company. Doing an apples-to-apples comparison is virtually impossible, so there is no easy way to sort out which “national” office supply contract offers the best pricing.
In fact, the answer may be that in order to get the absolutely best price, you would have to belong to several cooperative agreements and cherry-pick the best prices. But wait! Doesn’t that in some ways put us back to where we were 10 to 15 years ago?
We simply do not have the time or resources to do price comparisons across a multitude of different contracts. Dealing with multiple vendors is also time-consuming. Over the past six months I have been visited by all of the four major office supply companies at least once, some multiple times. In addition, I have been visited by five different “national” cooperative purchasing entities (Anybody besides me having a hard time keeping up with all of the acronyms?). There were also numerous phone calls and emails.
Of course, all of the vendors and the cooperative entities insist that they have the best pricing. In fact, I provided our purchase card spend data for the past year to three of them, and each claimed they were anywhere from 5 to 12 percent cheaper than our current “national” supplier. Of course, as the saying goes, figures don’t lie.
Here is the bottom line: Are we better off than 10 to 15 years ago? Yes. Are we better off than two to three years ago before the current surge in “national” contracts? No. There are now too many choices and too many vendors claiming their “national” contract is the best. You have heard it said that if everything is a priority, then nothing is. Well, perhaps if every national contract offers the best deal, then none of them do.
What’s the solution? I don’t know, but wish I did. This is quickly becoming a frustrating issue that is taking up way too much of a purchasing department’s valuable time.
What do you think? Tell us in the comment box below.
About the author
Steven M. Demel, CPPO, is purchasing manager of the Tacoma (Wash.) School District.