A purchasing group is a way for small business owners to stay competitive in the market and achieve new growth. Buying groups are particularly beneficial to those in the construction industry, where materials prices can fluctuate, and supply options are many. As a part of the industry, asphalt and paving companies stand to benefit from joining a buying group, and here are just a few of the reasons why.
1. The Support of a Purchasing Group
Sometimes referred to as a group purchasing organization, this group relies on the combined purchasing power of the members of the organization in order to negotiate lower prices or better deals from industry suppliers. The administrative entity assumes the responsibility of negotiations and attracting new members, and those who enroll in the group reap the benefits. The goal is to bring small independent businesses together in order to leverage a greater demand for lower costs or better contract terms.
2. The Benefit of Reduced Costs
Both suppliers and group members benefit from the reduced costs associated with buying groups. Whether buying pavement materials, lumber or other construction materials, the ability to buy at a bulk rate without each small business actually needing a bulk order is cost-saving. Suppliers benefit from the large order placed by the buying group, often providing more consistent revenue than the hit-or-miss needs of small companies. Suppliers have more buying power with the raw goods or materials when there is bigger or more consistent demand. It is also more cost-efficient to manage one purchasing contract with the buying group than several dozen with smaller companies.
Some of the administrative fees are paid for by the suppliers or vendors where the purchasing group has a contract. There are other groups that offer a combination of membership and vendor fees to cover the costs of the group. These fees are usually nominal compared to the savings from the lower prices of materials.
3. The Perks of Best-Practice Sharing
Even though it is considered a purchasing group, many of these organizations extend their services beyond better contract negotiations. A quality group acts as a resource for your company, identifying new trends or sources of supply for industry materials. There should also be sharing of best practices to help maximize efficiency and reduce waste. Group meetings bring industry peers to a place when you can consult, ask for advice or simply develop relationships for future needs down the road. There are some groups that have software support for their members as well.
4. The Idea of Consistency
Small business owners have many buying options if the operations are small scale, but in addition to increased costs, there could be problems with the supply chain. Working with a buying group places the logistical concerns on the administrative end, but there is often more security of a vendor meeting the needs of the larger group over a single purchase. This leads to consistency in material acquisition and project completion timelines.
Join the Premiere Buying Group for Pavement Contractors
At PNBA, we leverage the buying power of national construction professionals to get the best pricing and vendor partnerships. Contact us to find out more about our partnerships and membership options.