Download - 5.24.12 Starting a Purchasing Co-op
Steps to Starting a SuccessfulPurchasing Cooperative
Part 4
Startup of a Purchasing Co-op
• 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.
Ian GrayPresident & CEO
Don CollyardPrincipal
Greg DinsdalePresident & CEO
Lisa StolarskiDirector
Steps to Starting a SuccessfulPurchasing Cooperative
Part 4: Startup of a Purchasing Co-op
Part 4: Startup
• Major Steps
• Technology Strategy
• Expertise & Resources
Major Steps
• 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
Major Steps
• Incorporation process– Governance Model
– Bylaws
– Founding Directors
– Banking, Auditors
– Security Laws
• Hiring of General Manager– Define strategic priorities & milestones, etc.
Major Steps• Co-op’s branding
– Website, domain name (.coop)
– Marketing materials
• Recruitment
– Membership
– Credit criteria / policies including AR insurance
– Geographical exclusivity or other restrictions
Major Steps
• 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)
Major Steps• 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!
Technology Requirements• 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
Accounting Systems
• 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
Rebate Tracking• 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.
Rebate Tracking
• 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
Rebate Tracking System
• 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 control
Electronic invoicing results in additional benefits
Rebate Tracking System
• 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
Software for Event or Group Buy
• 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
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
Software for Event or Group Buy
Supplier EDI (Electronic Invoicing)
• 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
Member Services
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
Member Services: Transactional
• Transactions must be delivered “securely” with a confirmation
• Technology must accommodate everyone
• Service is complex. Imperative to “get it right!”
Member Services:News & Promotions
• Members need to feel part of the Co-op
• Website provides complete and secure information
• Social media strategy involves members
Member Services: Confidential Info
• 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
Member Services: Support Calls
• 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!!!
National Accounts & Marketing Support
• 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
National Accounts & Marketing Support
Purchasing Co-ops use technology to support member 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
Online Ordering from Suppliers
• 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
Resources
• National Cooperative Business Association• www.co-opsusa.coop• www.ncba.coop• List of cooperative development centers• Consultants• www.buyinggroupservices.com• Etc.
Ian GrayPresident & CEO
Don CollyardPrincipal
Greg DinsdalePresident & CEO
Lisa StolarskiDirector
Q&A: Steps to Starting a SuccessfulPurchasing Cooperative
Part 4: Startup of a Purchasing Co-op
Steps to Starting a SuccessfulPurchasing Cooperative
Prepared by
Ian Gray, President & CEOBuying Group Services, Inc.
Don Collyard, PrincipalMain Street Cooperative Group
Meredith Rafferty, Co-op DevelopmentNorthwest Cooperative Development Center
Lisa Stolarski, Executive DirectorCo-ops USA, NCBA
Diane Gasaway, Executive DirectorNorthwest Cooperative Development Center
Spring 2012
Part 4
Startup of a Purchasing Co-op