Save on Freight by Increasing Your Volume (Without Increasing Your Volume)Written by Guest Blogger
Freight is a significant cost for any business that manufactures products and needs to get those goods into the hands of its customers. Some companies may feel that because of their substantial shipping volume and established relationships, they’re already getting the best prices they can get. On the flipside, some smaller businesses may think that because of their modest-sized shipments and lack of clout, they’re stuck with the price tag they’ve traditionally been shown. But the truth of the matter is, both scenarios lend themselves to the prospect of better freight pricing. And that opportunity lies in group purchasing.
In general, the more volume a company can purchase from a vendor, the lower the vendor is willing to sell its products for. This is due to the economies of scale that come into play with larger volume customers and how their stranglehold on the vendor’s revenues makes retaining their business more critical to the bottom line than customers purchasing in smaller quantities. So how can customer make itself bigger overnight with the goal of saving on materials and supplies or on services like freight management? That’s where group purchasing comes into play.
Simply stated, group purchasing means combining the procurements of multiple organizations, to appear as a larger customer, and thus receive reduced pricing from a given supplier. When customers band their purchases together, they are each able to receive the fruits of being a more important customer without actually purchasing any additional volume individually. But how does a company go about doing this without adding administrative costs of coordinating with other companies or creating logistical headaches?
One method is by becoming of a member of a Group Purchasing Organization. GPOs specialize in aggregating the buying power of companies to a network of top-performing suppliers in order to deliver greater cost savings, stronger business relationships, and foster an environment where all parties can flourish. Companies in GPOs continue to make purchases in the same manner as they always have, but enjoy reduced pricing simply by being part of the group. Suppliers selling into a GPO consider its members one large customer, and therefore elevate efforts to retain and provide service to that customer accordingly. The integrated network of partners that GPOs provide, like Third-Party Logistics Providers such as ReTrans Freight, also help its members better manage their supply chains and reduce risk.
In any negotiation, you have to provide a benefit to the other party to receive a benefit in return. The world of freight carriers is no different -- if you want lower prices you’re going to have to give carries a reason. And group purchasing gives them that reason in a big, big, way.
Meet our guest blogger, Joe Ptak:
Joe Ptak is the Manager of Marketing Communications for Prime Advantage, in Chicago. Joe is a perception engineer who contemplates the meaning of life every time he stares at a spreadsheet for too long and has never, Ever, taken an elevator to the 2nd floor.