Leveraging Economies of Scale
By definition, Cooperative Purchasing is a business model that allows a group of buyers to pool their
buying power to negotiate more favorable pricing on goods and/or services. Cooperatives are setup to
take advantage of the combined purchasing volume of the multiple companies in the group.
Cooperatives can vary in size, but are all usually built upon a common set of principles, such as:
- Voluntary and open membership
- Autonomy and independence
- Education, training, and information for members
- Concern for community
- Financial accountability
Cooperative Purchasing can create significant contributions for its members’ bottom lines by lowering
costs, reducing redundancy, and freeing up valuable resources to be reallocated to other strategic
initiatives.
Some of the benefits members can expect to take advantage of when utilizing a cooperative are:
- Best practices – Access to the combined knowledge of all members to help identify best
practices and efficient methods to reduce total cost and improve efficiencies - Strength in numbers – Volume purchasing power afforded by the size of the cooperative helps
to provide each of the members with economies of scale that they wouldn’t have on their own - Superior pricing – Due to purchasing in volume, the cooperative gains the ability to negotiate
for discounted pricing, and possibly rebates - Quality contract control – Many cooperatives will conduct a spend analysis to identify goods
and services, as well as suppliers, that are the most meaningful to the group. This helps to
create a portfolio that includes suppliers dedicated to meeting the specialized needs of the
membership. - Time savings – Many purchasing agents simply do not have the time or resources to research
new product categories, source competitive quotes, or negotiate pricing. These processes have
already been completed by the cooperative, which releases time that can be reallocated to
other tasks.
Ultimately, organizations that are part of a cooperative purchasing group should treat it as a reliable
business partner, helping to support their mission and achieve their fundamental goals.
For more information about NEOnet’s developing Essential Discount Marketplace, please
contact Jason Smith by phone at (330)926-3900 x-601115 or by email at smith@neonet.org.