Table of Contents
Understanding the Differences in Group Purchasing
Group purchasing is not new — the first purchasing cooperative in the United States was formed in 1890. Since then, organizations have joined together to combine purchase volume, and then leverage that volume with suppliers in the negotiation of improved prices and better contract terms and conditions. Until recently, most group purchasing efforts were made through cooperatives (or co-ops) primarily composed of government-owned, non-profit, or agriculturally oriented organizations, such as farmers coming together to purchase feed or schools to purchase textbooks.
The Basics of Consortiums
Initiating or joining a consortium is like planning a marriage. To enter into this kind of alliance, the members must be familiar and comfortable with each other, know how to get along, and be committed to the relationship. And because of the necessary sharing of highly proprietary information, the consortium members must trust each other and protect their members' competitive information, even trade secrets, as if they were their own (see box below).
The Legal Aspects of Consortiums
By marketing definition, consortiums are combinations of competitors. Consortiums must operate with careful regard to the federal and state laws to which they are subject, particularly antitrust laws, lest the individuals and organizations participating in the consortium open themselves to criminal liability. Antitrust law is complex, but most consortiums can safely operate by adhering to certain rules, which include:
Participating in a Consortium
The steps of the consortium process are flexible. Whether each step is a part of the process depends upon the complexity of the consortium activity and the procedural decisions made by the group. However, most of the 20 steps detailed here are likely to be applied and all should be considered. Steps one through 10 cover the initiation of the program and formation of the first consortium. Steps 11 through 15 include the pilot project, agreement on specifications, requests for quotation, joint negotiations, and contract award. The remaining steps address documentation summary, performance data, evaluation of the process, assessment, reports, and program expansion.
Ruth Anderson is the associate director of the division of procurement for the University of Wisconsin system, which includes 26 campuses. Previously she worked for the U.S. Environmental Protection Agency as a contract specialist and contracting officer. Ms. Anderson has a master's degree in public administration and a bachelor's degree in political science from the University of Illinois.
Kathleen E. Macie, C.P.M.
Kathleen E. Macie, C.P.M., is purchasing director for Dun & Bradstreet Supplier Evaluation and Management Services. Previously, she was president of her own business, Purchasing Partnership Programs, initiating purchasing consortiums for "for profit" corporations and small businesses. Ms. Macie is vice president and treasurer of NAPM—Seven Counties, Inc. and NAPM District VIII professional development committee vice chair . She has presented NAPM International Purchasing Conference workshops, has written for Purchasing Today™, and contributes to Pace, Dutchess Community, and Iona colleges in purchasing and materials management programs. Ms. Macie has a BS degree from the University of Maine and an MBA from the University of New Haven.
- Wagner, Greg, of State of Wisconsin Technical College System Board, Madison, Wisconsin. Telephone conversation with Ruth Anderson, August 24, 1996
- Brown, Judy, of Fox Valley Technical College, Appleton, Wisconsin. Telephone conversation with Ruth Anderson, August 20, 1996
- Lewis, Jordan D. Memberships for Profit-Structuring and Managing Strategic Alliances. The Free Press, 1990.
- NAPM Purchasing Today™, May 1996, "Coming Together to Cut Costs"
- NAPM Purchasing Today™, May 1996, "The Consortium: Basic Antitrust Principles"
- NAPM Purchasing Today™, May 1996, "What's the Difference?"
- NAPM Insights, August 1995, "Purchasing Consortiums Move into the For-Profit Arena"
- NAPM Insights, September 1994, "Purchasing Cooperatives: What Are The Red Flags?"
- NAPM Insights, March 1993, "Joint Purchasing Under the Federal Antitrust Laws"
- NAPM Insights, September 1991, "Purchasers Liability under Robinson-Patman,"
- NAPM 81st Annual International Conference Proceedings, "Coalition And Consortium Purchasing Power: It's Big, It's Here, And It's The Future Of Strategic Purchasing," National Association of Purchasing Management, 1996
- NAPM 80th Annual International Conference Proceedings, "The Purchasing Consortium - Is It Right For My Organization?" National Association of Purchasing Management, 1995
FOR FURTHER READING
- Business & Health, September 1991, "Coalitions: The Convergence Continues"
- PBS Adult Learning Satellite Service, "Consortium Connection: The Consortium for Distance Learning"
- Milwaukee 11 Business Journal, February 1994, "The Coalition Craze: Reform or Marketing?"
- International Journal of Purchasing and Materials Management, Winter 1996, "The Industrial Purchaser and the Robinson-Patman Act"
- Small Business Reports, October 1992, "All For One, One For All"
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