| Mission Answers Commodities |
Answers
How Does It Work?
Members establish annual negotiation priorities
High degree of use across members
Few technical complexities
Minimal effort in the past
Competitive sourcing environment
Members collect usage and past sourcing information
TransSource identifies and certifies potential suppliers
TransSource conducts supplier forum to solicit ideas
TransSource and members set sourcing strategy and define RFQ
TransSource issues RFQ, evaluates bids, creates negotiating strategy, and conducts negotiations (with member sponsor and alternate
Members finalize contract with successful supplier
TransSource monitors supplier performance and conducts quarterly cost reduction sessions
Something to offer and something to get
Each member must bring strength in an area to benefit others
Common culture
All must be collaborators and compromisers to agree on deals and stick to them
Centralized purchasing
Member speaks with one voice and represents its total company volume
Readily available data
Minimizes time and insures accurate portrayal to suppliers
Executive support for consortium buying
Insure that the consortium will survive a member's personnel change and permit member to contribute the time and expertise to make the consortium successful
What Evidence Supports Its Success?
Cross-industry consortium - reported to achieve savings of 5% to 40%, averaging 20%
CAPS purchasing consortiums study by T.E. Hendrick - 13% savings; $2.3 million annual savings with a cost of $300,000
Barge industry joint buys - savings of 10% on lube oil
Rail industry price comparison - 20% price differential between large and small users, worth $250,000 annually to the smaller user
Airline consortium - reported to generating savings on services
| Risk | Management Plan |
| Anti-trust violation | Create members contract with anti-trust lawyer Avoid membership with head-to-head competitors Avoid "35% share of market" commodities |
| Confidentiality of members' existing prices | TransSource provides firewall between members (part of membership contract with TransSource) |
| High volume participatant(s) pull out of a deal | Only undertake initiatives were 3/4 of group agree to join
Frequent confirmation that members are on board On-going monitoring of the use of deals done |
| Quality problems arise | Supplier certification done up front
Negotiate quality and reliability into contracts Monitor performance throughout the contract |
| Suppliers refuse to participate | Focus on competitive markets where the consortium is a comparatively small player |
April 24, 2000
Copyright © 2000 TransSource Corporation