WHY ARE INSTITUTIONAL PURCHASING COOPERATIVES POPULAR RIGHT NOW?

For retailers selling goods to schools, universities, counties, cities and states, there have always been hoops to jump through when it comes to selling to these entities. One of the biggest challenges has been getting on individual “bid lists”. Otherwise, as a retailer, there is literally no chance to participate in purchasing opportunities and Requests for Proposals (RFP’s) issued by these institutions. Of course, there are a lot of schools, universities, counties, cities and states to connect to! Imagine the time and manpower involved for retailers who wish to, for example, be listed on each bid list across a state the size of Texas or California! It’s a very tedious process (and is probably virtually impossible to achieve)!

Of course, in most cases these entities are actually required to find the lowest possible prices for the goods they purchase. And, since they also need to utilize vendors that are on their bid lists (or even those that can provide minority-owned or women-owned certifications, they’ve sometimes been forced to select and buy from a vendor that isn’t really all that well-suited to their needs.

Another challenge is quality, knowledge and experience. For example, just because a vendor can provide the lowest price on a much-needed piece of music software or a mixing board to record the school band doesn’t mean that this same company has the knowledge or expertise to provide accurate advice before the sale – or the capability to install an item properly after the sale.

In short, there’s more to a smart purchase than low pricing. And the traditional bid list/RFP process just doesn’t address that challenge effectively. But, make no mistake, competitive pricing matters.

That’s where Purchasing Cooperatives – also known as “Co-ops” – come in. The concept isn’t brand new; these modern, web-based organizations are essentially modeled, to some degree, after the old “farm co-ops”. The goal is the same: to increase buying power and access to quality and low pricing for Co-op members – many of whom will be purchasing key items quite regularly. Co-ops are not yet widely utilized in all 50 states, but their popularity is growing. And, Co-ops have truly become the norm among institutions in key (and very powerful) purchasing states such as Texas.

Thus, entities are addressing the delays, hiccups and procurement red tape of the past by signing on to Co-ops such as BuyBoard (a prominent co-op that enjoys a big market share in Texas and also services other states.). BuyBoard (and competing Co-ops) do serve as middle-men between buyers and sellers. And that can be a very good thing. The good news, is that it doesn’t mean that the professional relationships between buyer and seller are compromised. Co-ops do take a small percentage of each transaction from the seller. But, they also provide added value to buyers by offering an easily accessible list of competitively procured product resources ranging from audio recording gear to lunch tables – and everything in between. So, essentially, Co-ops can be convenient “one-stop shops” for government organizations and educational institutions.

Of course, both purchasers and retailers must rethink the way they work through the buying/selling process. They do need to learn a host of new procedures and be willing to embrace procurement adjustments if they want to work with a Co-op.

For schools and local/state government staff, they may be restricted to selecting a supplier that participates in a Co-op. So, they may be unable to buy from a long-standing preferred retailer that doesn’t belong to a Co-op. But, on the upside, the lengthy and exhausting RFP process can become a non-issue (nice time saver!), since Co-ops promise to provide product discounts and insure highly competitive pricing to their buying customers. So, purchasing from Co-op awarded suppliers offers institutional buyers easy access to a wide array of competitively procured suppliers, as well as reducing time and headaches. Sure, change isn’t easy. But sometimes it is actually an improvement.

For retailers, the time involved in uploading their (sometimes massive) list of products onto Co-op website platforms can be both challenging and time-consuming. And vendors should pay close attention to membership deadlines and details so they don’t miss an opportunity. Frankly, if a supplier decides not to list with a Co-op, they may find that they are unable to work with longstanding school and government clients. So the effort is, generally, well worth it!

Despite the pros and cons of trying anything new, Purchasing Cooperatives like BuyBoard and other Co-ops remain the trend in procurement and there’s no indication of that changing in the near future. In many ways, buying through a Co-op makes life much easier for procurement professionals. Co-ops offer a web-based interface through which orders may be placed – for any and all participating suppliers. And being a Co-op member certainly doesn’t preclude buyers from being able to take advantage of manufacturer limited time deals, since they’re still able to maintain a direct, personal relationship with their favorite Co-op vendors.

Once a retailer has successfully navigated the proposal process and been awarded a contract by a Co-op, they are likely to gain new clients that may have been difficult to reach previously. Additional exposure is never a bad thing. And Co-ops offer a far-reaching, new outlet for selling their goods!

Nothing’s perfect. But the Co-op concept is really gaining traction. More and more institutions – in more states – are adopting and working with Purchasing Cooperatives. So, it does look as though they are here to stay. And that can be a good thing for all involved.