Thursday, August 5, 2010

Consortium and Aggregate Buying

I'd like to share information on a project that I was working on before but never really took off due to political reasons. It's basically a concept in maximizing profit through cutting cost which is what most company's are going through these days. The project is called Consortium and Aggregate Buying. This project was intended for large companies, nevertheless I wish to see this being used by small and medium enterprises (SME's) because of the tremendous benefits it can offer.

Ok so the idea goes like this, based from what it's called "Consortium and Aggregate Buying" it's exactly what it says. The gathering of resources or volume before buying. If your into a business then you must be selling some sort of product or services. In this case we'll focus on products. To sell a product one must manufacture it first and this entails purchasing raw materials (unless your a middle man in the supply chain).

Normally a manufacturing company buys their needed raw materials from whoever offers the lowest cost that's within their standard of quality. Big companies usually get a good price because of their huge volume compared to smaller companies who have minimal volume of the same item. Hence, small companies don't enjoy what big companies do in terms of their buying power is concerned. But what if we can level the playing field to the benefit of everyone. That means for the benefit of the buyer which is the manufacturing company and the seller which is the supplier. How do we exactly do this you might ask? Right, by means of Consortium and Aggregate Buying.

The idea is to pull in all the volumes of a particular item that is needed by these manufacturing companies and have the suppliers bid on them according to the volume that is required. Believe me the figures would be staggering. Now what would this mean to all the players, read further..

1. For large buyers that have enjoyed a good price from their existing volume, the cost can even be brought further down due to the added volumes from other smaller buyers.

2. For small buyers they can enjoy the benefits of what large buyers are enjoying. Imagine the saving they would be getting.

3. For the seller or bidder, an increase in market due to large amount of required volume.

To illustrate this click on the following link: Consortium Buying

Now there are a few drawbacks to this, first of which is the information of volume and current buying price that would be shared. Most buyers do not want to divulge this information due to competition reasons. Second is that this method breaks away from the traditional procedure of procurement that many are still reluctant to grasp change. Nevertheless, the benefit of this far out weights these problems. In all, this would be much easier to implement within a group of company that are associated with one another. All it takes is political will from top management.

Viewing the idea as big as it may seem, I believe this can be achieved in a much smaller scale even to the level of an owner of a sari-sari store. Say if you have about 10 sari-sari stores in your neighborhood all selling similar products, all of them can cut cost by pooling in their resources together. All it takes is cooperation and trust. It can also promote friendly competition. I know there are others that are already doing this through cooperatives and other grass root associations and I salute them for their efforts.

So there, I hope I have provided some valuable insights to those who are looking for ways to improve their business operation.

Oh by the way, the whole process of this idea can also be carried out online.

Thanks for reading...

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