From the very beginnings of evolution itself, and through the passage of the ages ever since, two basic fundamentals have held true. Number one: The big fish get to eat the little fish. Number two: The big fish get bigger. Charles Darwin knew this… even if he was less sure as to how to keep his beard trim.
So the bottom line is that we are better, from an evolutionary standpoint, when we are bigger. This is also true from a military point of view… and also an economic. People… SMEs… even corporations… have always pulled together, to pool resources and work towards common goals; figuring they are stronger when together. It is also true from the standpoint of nations, for instance with the “Better Together” campaign for a “no” vote in this year’s Scottish referendum.
This theory remains true for employees, in terms of consumer societies such as the Co-Op, and trade unions. However, it is also true for the employers, who increasingly pull together in terms of buyouts and partnerships, as they increasingly look for greater and greater return on their own spend. Yes, you can feel comforted that in today’s fragile economy, businesses are also feeling the pinch; finding they need to achieve more, with less resources, just as we are as consumers. This process of rationalisation can lead to companies streamlining their operations, perhaps by sharing resources and doing what they can to become leaner, and work smarter.
What we are really talking about here is the concept of “Group Purchasing”, or strategically grouping together to improve your purchasing position. Group Purchasing touches all aspects of commerce. Of course at one end, companies like Tesco — with their thousands of outlets — can offer substantial national business to any supplier. Good for the supplier, yes, but it also puts Tesco in a position where they can effectively negotiate for an extremely competitive price for those goods. The same holds true for companies like Hertz, who will look to buy whole fleets of cars, or Toys R Us, who will be able to retail products across a range of outlets, internationally.
Group Purchasing has been in existence for quite a while, especially in certain industries such as education and health care, where councils and the NHS are able to negotiate on price, based on the quantity to orders they can guarantee. However, the process has now been adopted by many different industries. Notably, exactly the same process holds true for the business gas energy market. As one consumer of energy, you have little bargaining power with your provider. However, if you were to form a “Buying Group” with other companies, you would immediately improve your negotiating position, strategically placing yourself in a much stronger position.
So, what might be the benefits to you, as a business gas customer, if you’re considering forming a Buying Group? Let’s consider a few of these in turn
- Put simply, once a member of a Buying Group you are, as discussed earlier, in a much stronger position to negotiate with your energy supplier, and drive prices down. In economic terms, this is known as Economy of Scale.
- You may also be able to re-negotiate the actual contract itself, striking a better deal for you (and the other member businesses) moving forwards.
- Equally, you might be able to buy your energy on more amenable terms. In other words… your terms. For instance you might be able to buy gas during the summer, when prices are cheapest. This isn’t cheating… this is exactly what bigger corporations do themselves. Why should they have unique access to all the best moves?
- Aside from savings, you might also find other benefits from joining in with other businesses… even if they are competitors. Starting by sharing the bills, you might also move on share knowledge… intelligence… information. You will find each member company has its own area of interest in energy acquisition, and sharing this information will help every member company with improvements in their own energy efficiency and technology.
- Streamlining. Putting your energy requirements through one shared resource will also help streamline the process itself; for instance pooling administrative and purchasing processes, decreasing the individual drain of that function within the business.
To surmise: you are richer together, and poorer apart. Using these principles of Group Purchasing, and forming a Buying Group, will help you maximise potential savings, making your business more competitive and giving you a sharper edge over the competition, in what is likely to be a competitive marketplace. What is more, with situations like that taking place in the Ukraine, and the commensurate threat by big boys like Russia over energy supplies, it is more important than ever for you yourself to stand as tall, and as big, as possible.