What is group purchasing?

The idea in one line

Companies that each buy small quantities combine their demand, so suppliers price it as one large order.

How it works

A group purchasing organisation collects what its members need, takes the combined volume to suppliers, and agrees prices and terms that every member then buys on. Each member still decides what to order and when.

It comes in several forms

Researchers at the University of Twente describe five main forms of cooperative purchasing. They differ in how much say each member has and in how many activities the group shares [1]. At one end, a few companies informally share a contract. At the other, a third party runs the whole process for many members. Jmaa is the second kind: it gathers the demand, runs the sourcing round, signs the supplier contract and sells to each member at the agreed price.

What a member gives, and gets

• You accept the group's specification for an item in place of your own variation.
• You commit, as far as you can, to the quantity you forecast.
• In return you get a price tier you could not reach alone, one agreement in place of many, and one party accountable for delivery.

Where it fits best

Standard, repeat purchases that many companies buy in the same form: packaging, stationery, cleaning supplies and other consumables. It fits poorly for one-off or highly customised purchases.