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5.24.12 Starting a Purchasing Co-op
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5.24.12 Starting a Purchasing Co-op

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Purchasing cooperatives have become an essential tool for many businesses and organizations. Purchasing cooperatives help members improve their competitiveness, and leverage their combined purchasing …

Purchasing cooperatives have become an essential tool for many businesses and organizations. Purchasing cooperatives help members improve their competitiveness, and leverage their combined purchasing volumes into savings and efficiencies. In this four-part educational series, co-op developers will learn the strategies and the development process for starting a purchasing cooperative.

Attendees will learn how to:

Recognize the benefits of purchasing cooperatives

Define the types of cooperative purchasing

Define key factors in the feasibility of purchasing
cooperatives

Understand major steps in starting a purchasing cooperative

Part IV: Starting a Purchasing Cooperative

Major steps in starting a purchasing co-op

Technology strategy

Published in Business , Technology
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  • Please continue to submit your questions using the question box.The panel will address as many of the questions as time permits and will address additional questions in a Q&A to be posted at (website).Thank you!
  • Technology strategy:Accounting system Rebate tracking systemsMember purchase & rebate reporting Supplier sales and rebate obligation reportingEvent or Group BuysElectronic invoicing (EDI) with suppliersMember servicesNational accounts / Marketing websiteOn-line catalog / Member ordering
  • nothing crystalizes a decision like having to write a checkSecurity laws regarding soliciting for investment through shares
  • Supplement accounting system with “outside” reports (Simply Accounting and LBMX Group Solution - $1K+)Middle Strategy – partial integration (Sage AccPac and LBMX Group Solution - $50K+)Custom Strategy – accounting package written to meet specific requirements of Co-op ($200K+)
  • Rebates need to be:Timely (real-time generates the most benefits)Accurate (some members will insist on reconciling to the penny)
  • Note that with EDI Implementation of Invoicing:Line-item rebates are possibleDaily timeframeCo-op recovers full control
  • Relies on Supplier Reports – all different formatsLeast timely – weeks and months in arrearsLess accurate – lots of errors..some intentionalUnable to provide any form of audit for Members Co-op is viewed as being “out-of-the-loop” by both Suppliers and MembersMajor problem: Reconciling supplier reports to member invoicesFull EDI implementation can solve some of the problems
  • Technology must accommodate everyoneFocus must be the bringing of new efficiencies to current supply chain processes
  • Social media strategy Support the WebsiteCreate a sense of “community” Keep Co-op Top of MindAllow for exchange of ideas
  • The Co-op must be vigilant to insure confidential information remains confidential!
  • Initially seen as a big opportunity – Biggest issue is lack of consistent numbering between Members’ systems and various Suppliers’ systemsDepending on the Sector can be several hundred thousand sku’s required to be maintained with constant updates / additions / deletesChanging Member ordering habits is very difficultBenefits are very hard to measure –May reduce labor costs at Member level Definitely adds cost at Co-op level
  • Please continue to submit your questions using the question box.The panel will address as many of the questions as time permits and will address additional questions in a Q&A to be posted at (website).Thank you!

Transcript

  • 1. Startup of a Purchasing Co-op Part 4
  • 2. • Welcome!• The webinar will be recorded and available at www.ncba.coop• We welcome your questions! Submit them anytime by typing them into the chat box in the control box on your screen.
  • 3. Ian Gray Greg Dinsdale Lisa Stolarski Don CollyardPresident & CEO President & CEO Director PrincipalPart 4: Startup of a Purchasing Co-op
  • 4. • Major Steps• Technology Strategy• Expertise & Resources
  • 5. • Obtain commitment of Founding Members – Put up the “cash” through investment – Be aware of security laws – Commit to help recruit other members – Commit to participate in preferred supplier negotiations
  • 6. • Incorporation process – Governance Model – Bylaws – Founding Directors – Banking, Auditors – Security Laws• Hiring of General Manager – Define strategic priorities & milestones, etc.
  • 7. • Co-op’s branding – Website, domain name (.coop) – Marketing materials• Recruitment – Membership – Credit criteria / policies including AR insurance – Geographical exclusivity or other restrictions
  • 8. • Target suppliers and purchase categories – Initial targets – Create Preferred Vendor Selection Committee – Meet with suppliers, receive proposals – Committee selects supplier(s) – Identify type of endorsement (Listed vs. Preferred vs. Preferred Exclusive)
  • 9. • Decide finance & technology infrastructure• Best solutions depend upon: – The billing / payment model selected – Whether Event or Group Buying is the priority – Few or many members – Few or many suppliers – Budget for technology expenditures IT decisions at startup determine the future!
  • 10. • Accounting system• Rebate tracking systems – Member purchase & rebate reporting – Supplier sales and rebate obligation reporting• Event or Group Buys• Electronic invoicing (EDI) with suppliers• Member services• National accounts / Marketing website• On-line catalog / Member ordering
  • 11. • Requirements tend to be simple but unique• No off-the-shelf accounting software meets all requirements• Choices: – Supplement accounting system with “outside” reports – Middle strategy of partial integration – Custom strategy of accounting package written to meet specific requirements
  • 12. • A critical component• Rebates need to be: – Timely – Accurate• Members receive audit reports of rebates by invoice• Co-op tracks rebates from suppliers…by invoice, preferably by item.
  • 13. • Central Bill / Central Pay Model with EDI – Timely: know where you stand every day – Creative: bigger rebates on special items – Accurate: can be audited at line-item level – Creates confidence – Co-op is in complete control
  • 14. • Direct Bill / Central Pay by the Co-op – Similar benefits to Central Bill – Usually at invoice totals only – Time lag of two to six weeks – Accurate and auditable – Co-op loses some of the controlElectronic invoicing results in additional benefits
  • 15. • Direct Bill / Direct Pay by the Members – Relies upon supplier reports – Least timely – Less accurate – Unable to provide any form of audit for members – Co-op is viewed as being “out-of-the-loop”Major problem: Reconciling supplier reports to member invoices
  • 16. • Consolidates the purchases of specific products for better results• Suppliers will compete aggressively for a “ready to fill” large volume order• Demonstrates to members that the Co-op can save them money
  • 17. Itemized purchasing data is extremely beneficial!• Leads to focused, volume buying• Price convergence at the lowest price• Optimal purchase timing• Knowing as much or more than the suppliers when you negotiate with them
  • 18. • EDI captures details of purchases• EDI Program should allow suppliers to send by their preferred method (X12, ASCII, XML, Web- form)• Email must be avoided – unsecure and no confirmed delivery• Co-op should outsource this function to the experts
  • 19. Types of interactions with members: – Transactional documents (invoices, statements, payments) – News and event promotions – Confidential information (program details, member lists, rebate reports) – Support calls to address issues
  • 20. • Transactions must be delivered “securely” with a confirmation• Technology must accommodate everyone• Service is complex. Imperative to “get it right!”
  • 21. • Members need to feel part of the Co-op• Website provides complete and secure information• Social media strategy involves members
  • 22. • Secure area of website for: – Member lists – Preferred supplier lists – Basic program details (Terms Sheets) – Bylaws, policies• Rebate program details never published in written form
  • 23. • CRM / Support Call Tracking Software• Requires current Member contact information• “Link” a support call to both member and supplier• Prospect tracking for member recruitment• Beware of upkeep for multiple databases!!!
  • 24. • National Account Programs can grow sales• Key is a common pricing and billing system regardless of which member is providing the product• Challenging because computer systems differ among members
  • 25. Purchasing Co-ops use technology to supportmember marketing:• Websites to help drive customers to their members• Product and image databases to enable members to publish their own on-line catalogs• Electronic “Sale Flyers” for their members
  • 26. • Initially seen as a big opportunity – Biggest issue is lack of consistent numbering between members’ systems and suppliers’ systems – Changing ordering habits is very difficult• Benefits are hard to measure – May reduce labor costs at member level – Definitely adds cost at Co-op level
  • 27. • National Cooperative Business Association• www.co-opsusa.coop• www.ncba.coop• List of cooperative development centers• Consultants• www.buyinggroupservices.com• Etc.
  • 28. Ian Gray Greg Dinsdale Lisa Stolarski Don CollyardPresident & CEO President & CEO Director PrincipalPart 4: Startup of a Purchasing Co-op
  • 29. Startup of a Purchasing Co-op Part 4Prepared byIan Gray, President & CEO Meredith Rafferty, Co-op DevelopmentBuying Group Services, Inc. Northwest Cooperative Development Center Lisa Stolarski, Executive DirectorDon Collyard, Principal Co-ops USA, NCBAMain Street Cooperative Group Spring 2012Diane Gasaway, Executive DirectorNorthwest Cooperative Development Center