The document outlines the major steps involved in starting a purchasing co-op, including obtaining founding member commitments, incorporation, hiring leadership, branding, recruiting members and suppliers, deciding on finance and technology infrastructure, and developing member services. It emphasizes getting the technology strategy right from the beginning to support functions like rebate tracking, electronic invoicing, secure information sharing, and marketing capabilities. Resources for assistance include the National Cooperative Business Association and cooperative development centers.
2. • Welcome!
• The webinar will be recorded and available at
www.ncba.coop
• We welcome your questions! Submit them
anytime by typing them into the chat box in
the control box on your screen.
3. Ian Gray Greg Dinsdale Lisa Stolarski Don Collyard
President & CEO President & CEO Director Principal
Part 4: Startup of a Purchasing Co-op
5. • Obtain commitment of Founding Members
– Put up the “cash” through investment
– Be aware of security laws
– Commit to help recruit other members
– Commit to participate in preferred supplier
negotiations
6. • Incorporation process
– Governance Model
– Bylaws
– Founding Directors
– Banking, Auditors
– Security Laws
• Hiring of General Manager
– Define strategic priorities & milestones, etc.
7. • Co-op’s branding
– Website, domain name (.coop)
– Marketing materials
• Recruitment
– Membership
– Credit criteria / policies including AR insurance
– Geographical exclusivity or other restrictions
8. • Target suppliers and purchase categories
– Initial targets
– Create Preferred Vendor Selection Committee
– Meet with suppliers, receive proposals
– Committee selects supplier(s)
– Identify type of endorsement (Listed vs.
Preferred vs. Preferred Exclusive)
9. • Decide finance & technology infrastructure
• Best solutions depend upon:
– The billing / payment model selected
– Whether Event or Group Buying is the priority
– Few or many members
– Few or many suppliers
– Budget for technology expenditures
IT decisions at startup determine the future!
10. • Accounting system
• Rebate tracking systems
– Member purchase & rebate reporting
– Supplier sales and rebate obligation reporting
• Event or Group Buys
• Electronic invoicing (EDI) with suppliers
• Member services
• National accounts / Marketing website
• On-line catalog / Member ordering
11. • Requirements tend to be simple but unique
• No off-the-shelf accounting software meets all
requirements
• Choices:
– Supplement accounting system with “outside” reports
– Middle strategy of partial integration
– Custom strategy of accounting package written to meet
specific requirements
12. • A critical component
• Rebates need to be:
– Timely
– Accurate
• Members receive audit reports of rebates by
invoice
• Co-op tracks rebates from suppliers…by
invoice, preferably by item.
13. • Central Bill / Central Pay Model with EDI
– Timely: know where you stand every day
– Creative: bigger rebates on special items
– Accurate: can be audited at line-item level
– Creates confidence
– Co-op is in complete control
14. • Direct Bill / Central Pay by the Co-op
– Similar benefits to Central Bill
– Usually at invoice totals only
– Time lag of two to six weeks
– Accurate and auditable
– Co-op loses some of the control
Electronic invoicing results in additional benefits
15. • Direct Bill / Direct Pay by the Members
– Relies upon supplier reports
– Least timely
– Less accurate
– Unable to provide any form of audit for members
– Co-op is viewed as being “out-of-the-loop”
Major problem: Reconciling supplier reports to member invoices
16. • Consolidates the purchases of specific
products for better results
• Suppliers will compete aggressively for a
“ready to fill” large volume order
• Demonstrates to members that the Co-op
can save them money
17. Itemized purchasing data is extremely beneficial!
• Leads to focused, volume buying
• Price convergence at the lowest price
• Optimal purchase timing
• Knowing as much or more than the suppliers
when you negotiate with them
18. • EDI captures details of purchases
• EDI Program should allow suppliers to send by
their preferred method (X12, ASCII, XML, Web-
form)
• Email must be avoided – unsecure and no
confirmed delivery
• Co-op should outsource this function to the
experts
19. Types of interactions with members:
– Transactional documents
(invoices, statements, payments)
– News and event promotions
– Confidential information (program
details, member lists, rebate reports)
– Support calls to address issues
20. • Transactions must be delivered “securely”
with a confirmation
• Technology must accommodate everyone
• Service is complex. Imperative to “get it
right!”
21. • Members need to feel part of the Co-op
• Website provides complete and secure
information
• Social media strategy involves members
22. • Secure area of website for:
– Member lists
– Preferred supplier lists
– Basic program details (Terms Sheets)
– Bylaws, policies
• Rebate program details never published in
written form
23. • CRM / Support Call Tracking Software
• Requires current Member contact
information
• “Link” a support call to both member and
supplier
• Prospect tracking for member recruitment
• Beware of upkeep for multiple databases!!!
24. • National Account Programs can grow sales
• Key is a common pricing and billing system
regardless of which member is providing
the product
• Challenging because computer systems
differ among members
25. Purchasing Co-ops use technology to support
member marketing:
• Websites to help drive customers to their
members
• Product and image databases to enable
members to publish their own on-line catalogs
• Electronic “Sale Flyers” for their members
26. • Initially seen as a big opportunity
– Biggest issue is lack of consistent numbering
between members’ systems and suppliers’ systems
– Changing ordering habits is very difficult
• Benefits are hard to measure
– May reduce labor costs at member level
– Definitely adds cost at Co-op level
27. • National Cooperative Business Association
• www.co-opsusa.coop
• www.ncba.coop
• List of cooperative development centers
• Consultants
• www.buyinggroupservices.com
• Etc.
28. Ian Gray Greg Dinsdale Lisa Stolarski Don Collyard
President & CEO President & CEO Director Principal
Part 4: Startup of a Purchasing Co-op
29. Startup of a Purchasing Co-op
Part 4
Prepared by
Ian Gray, President & CEO Meredith Rafferty, Co-op Development
Buying Group Services, Inc. Northwest Cooperative Development Center
Lisa Stolarski, Executive Director
Don Collyard, Principal
Co-ops USA, NCBA
Main Street Cooperative Group
Spring 2012
Diane Gasaway, Executive Director
Northwest Cooperative Development Center
Hinweis der Redaktion
Please continue to submit your questions using the question box.The panel will address as many of the questions as time permits and will address additional questions in a Q&A to be posted at (website).Thank you!
Technology strategy:Accounting system Rebate tracking systemsMember purchase & rebate reporting Supplier sales and rebate obligation reportingEvent or Group BuysElectronic invoicing (EDI) with suppliersMember servicesNational accounts / Marketing websiteOn-line catalog / Member ordering
nothing crystalizes a decision like having to write a checkSecurity laws regarding soliciting for investment through shares
Supplement accounting system with “outside” reports (Simply Accounting and LBMX Group Solution - $1K+)Middle Strategy – partial integration (Sage AccPac and LBMX Group Solution - $50K+)Custom Strategy – accounting package written to meet specific requirements of Co-op ($200K+)
Rebates need to be:Timely (real-time generates the most benefits)Accurate (some members will insist on reconciling to the penny)
Note that with EDI Implementation of Invoicing:Line-item rebates are possibleDaily timeframeCo-op recovers full control
Relies on Supplier Reports – all different formatsLeast timely – weeks and months in arrearsLess accurate – lots of errors..some intentionalUnable to provide any form of audit for Members Co-op is viewed as being “out-of-the-loop” by both Suppliers and MembersMajor problem: Reconciling supplier reports to member invoicesFull EDI implementation can solve some of the problems
Technology must accommodate everyoneFocus must be the bringing of new efficiencies to current supply chain processes
Social media strategy Support the WebsiteCreate a sense of “community” Keep Co-op Top of MindAllow for exchange of ideas
The Co-op must be vigilant to insure confidential information remains confidential!
Initially seen as a big opportunity – Biggest issue is lack of consistent numbering between Members’ systems and various Suppliers’ systemsDepending on the Sector can be several hundred thousand sku’s required to be maintained with constant updates / additions / deletesChanging Member ordering habits is very difficultBenefits are very hard to measure –May reduce labor costs at Member level Definitely adds cost at Co-op level
Please continue to submit your questions using the question box.The panel will address as many of the questions as time permits and will address additional questions in a Q&A to be posted at (website).Thank you!
