Your organization’s freight spend isn’t large enough perhaps the answer is leverage with other business units?

November 23rd, 2009 at 09:46am David DiSanto - DiSanto & Associates

What’s a buying/leveraging group?
A buying group is a collection of buyers that aggregate their demand into a single ‘account’ and negotiate with a commercial carrier/s for better prices and/or improved services and more importantly a “Known name” in the industry. The group of buyers should be organized around an industry sector or geographic region.

How do buying/leveraging groups work?
A group is usually formed when an individual or business decides use bulk buying tactics for transportation services. Once a sufficient group of customers is formed, the guaranteed customer base is used to negotiate volume discounts with service providers and carriers.

What are the advantages?
Buying groups are low risk and require little or no investment and the groups don’t have to be physically co-located just share the same “common goal.”

What are the drawbacks?
Buying groups depend on a guaranteed level of spend and are therefore at risk of being undermined by carriers offering the larger companies in the group separate deals (known as ‘cherry picking’) the group must also be accountable and be geared towards the 80.

Summarize:
The buying group or leveraging group is making a commitment to each other business unit to share information and a “guaranteed” piece of the business. “Commitment” is the largest most important piece of the organization and must be maintained and monitored on a regular basis and each business unit must have a say in each and every move.

Buying groups can grow expeditiously to encompass other units….. all geared to the “common goal.”

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Entry Filed under: Functionality, Optimization, Outsourcing, Spend Analysis, supply chain talent