One of the major benefits of any Buying Group is the selection of the Preferred Supplier that provides the best overall value proposition for each product category. In many cases, the Preferred Supplier will be the Supplier you currently deal with for that product category. You will simply enjoy better pricing and off-invoice advantages than you previously did before joining the Group.

In other cases, the Preferred Supplier will not be the Supplier that you currently purchase that product category from, and you will be expected to switch Suppliers. In most cases, the Preferred Supplier’s program will assist you in that transition by providing training, specials on new displays and buy-back programs of your old inventory. Experience has shown that the Buying Group whose members loyally support their Preferred Suppliers will be rewarded handsomely. Suppliers soon learn that they can quickly gain or lose sales volume depending on whether they are selected as a Preferred Supplier. The short-term pain of switching suppliers will be offset by significantly better overall value.

There may be a few exceptions to the “Buy only from Preferred Suppliers” rule, but these should be minimized. For example, if your brother-in-law is the Sales Representative for a Non-Preferred Supplier, you may still feel the requirement to purchase from him. There may also be some regional distribution issues that require you to purchase from a local supplier rather than from a Preferred Supplier.

For each major product category, a small group of your fellow members will be chosen to participate on the negotiating team, along with a specialist from BGS. The Preferred Suppliers are then chosen based on a wide set of criteria which includes factors from pricing, rebates, terms, return policies, service levels and the product brand acceptance.

All “non-confidential” details of the deal negotiated with the Preferred Vendor will be available on the “Members Only” website. These details will include, face of invoice discount levels, standard payment terms, freight allowance policy, claims procedure, and all of the Supplier’s Contact Information. You will not have access to details of the “confidential” negotiated rebates, allowances or special deals negotiated for Buying Group Members. Only the negotiating committee and BGS Management know the full terms of the negotiated deal. Strict enforcement of Preferred Supplier confidentiality enables Suppliers to offer better overall pricing only to the Buying Group Members without the risk of competitors or other of the supplier’s non-group customers knowing and saying “me too!”

Rebates are a powerful tool for both the Preferred Supplier and the Member. Suppliers like rebates for two main reasons;

• firstly they protect the “street price” of their products
• secondly they can structure the rebates such that they only pay for performance.
  
  

The Independent wins because they are able to protect the margins made on the sale of the products from their sales force that often wants to discount to the maximum allowed by the invoice price. At the end of the Calendar quarter or year, the rebate cheque comes in and goes right to the bottom line.

Most Independents believe that they are very good at negotiating the “Deal” with their Suppliers. In reality, if at the conclusion of their negotiations with their supplier, they were left with the impression that the supplier had not done everything possible for them, they wouldn’t be happy and would look for another supply source. Until the first rebate cheque arrives, many new members of Buying Groups are doubters.

Consider the following scenario. One of your best customers came to you and said, “I’ve got all my friends together who are in similar business as mine and collectively we going to:

• more than double (triple, quadruple) your sales to us.
• make it easier to invoice and collect money from us
• guarantee all payment to you so you won’t have any bad debts
• work with you to promote your products more
• make it less expensive for you to service my account
• have an annual get together where you can meet with all of us to discuss business
• let your sales representatives focus on increasing sales not negotiating pricing
• stream-line your claim process with us
• want a discount only if we do what we say we are going to do
• keep our deal confidential so your competitors and other customers won’t know what kind of discount you are giving

"In exchange for all of this we would like a special discount. Oh and by the way, we are asking your competitor the same questions and who ever gives the best overall deal will get all of our business."

How big of discount would you give – 5% - 10% - 15%? That’s why Buying Groups can negotiate a much better deal than any Independent can do by himself.

There are many benefits to belonging to a Buying Group, some that can be directly measured financially and others which are more difficult to quantify. On a day to day basis, the Buying Group will save you money through lower invoice pricing, better terms, and more efficient processes for invoicing, payment and claims. You will save time that can be focused on increasing sales and making other improvements to your business. You will have access to resources that help your business be more successful. The return on investment of joining a Buying Group is substantial for the above reasons alone.

In addition you will receive rebates on your purchases, some quarterly but most annually. Typically a cheque is delivered with a statement of where and how it was earned. As the Buying Group grows in size and the members truly focus their purchases towards the Preferred Suppliers, the rebate cheques grow year after year.

In addition to the rebate cheque that you receive, equity is built within the Buying Group. Some of this equity is specifically “ear-marked” as yours. Over time this fund gradually grows providing working capital for the Buying Group. Upon your retirement from the Group these funds are paid out over a 5 year period, providing a significant amount of post business income.

Buying Group Services Inc, as part of its Management Services Agreement with your Buying Group will implement The LBMX Solution Centre™ for Buying Groups. This world class technology enables Suppliers to electronically invoice the Buying Group for all of the Members’ purchases. It also allows the Buying Group to invoice and collect funds from its members for those purchases, which in turn are paid to the Suppliers. This "Supplier to Buying Group to Member" invoice flow is referred to as a Central Invoicing Model. The process is very effective as the Member only has to write one cheque for all their purchases made through the group, and the Supplier only has to invoice the Buying Group and receives one cheque for all of the members’ purchases in a period.

However, the real value in the LBMX Solution Centre™ for Buying Groups, is what it can now do with all the line item invoice data. The Buying Group now has a record of what every member purchased from every Supplier at the line item level. LBMX’s Rebate Management tool can calculate to the penny exactly what is owed from the Suppliers under each of the Rebate Programs and how much should be paid out to each member based on their purchases. It is all completely auditable, so the member can feel assured they are receiving everything they are entitled to.

Your Buying Group operations are managed day by day by a General Manager supported by a team of people employed by Buying Group Service Inc. (BGS). In most situations, your contact will be this General Manager. He / she is an industry expert and has overall responsibility for your Buying Group’s operation, including being responsible for gaining and sharing industry knowledge, attending industry tradeshows, annual negotiations, Member and Supplier Relations.

You will be required to purchase a Membership Share when you join the Buying Group. If at some point in the future, you decide to leave the Buying Group, the monies paid to purchase the Membership Share will be returned to you. The amount of the Membership will be determined by your Buying Group’s Board of Directors.

In addition, each Member will be expected to pay a Monthly Membership Fee for all the Buying Group Services. The exact amount will be determined by your Buying Group’s Board of Directors.

One of the major benefits of any Buying Group is the selection of the Preferred Supplier that provides the best overall value proposition for each product category. In many cases, the Preferred Supplier will be the Supplier you currently deal with for that product category. You will simply enjoy better pricing and off-invoice advantages than you previously did before joining the Group.

In other cases, the Preferred Supplier will not be the Supplier that you currently purchase that product category from, and you will be expected to switch Suppliers. In most cases, the Preferred Supplier’s program will assist you in that transition by providing training, specials on new displays and buy-back programs of your old inventory. Experience has shown that the Buying Group whose members loyally support their Preferred Suppliers will be rewarded handsomely. Suppliers soon learn that they can quickly gain or lose sales volume depending on whether they are selected as a Preferred Supplier. The short-term pain of switching suppliers will be offset by significantly better overall value.

There may be a few exceptions to the “Buy only from Preferred Suppliers” rule, but these should be minimized. For example, if your brother-in-law is the Sales Representative for a Non-Preferred Supplier, you may still feel the requirement to purchase from him. There may also be some regional distribution issues that require you to purchase from a local supplier rather than from a Preferred Supplier.

Rebates are a powerful tool for both the Preferred Supplier and the Member. Suppliers like rebates for two main reasons;

• firstly they protect the “street price” of their products
• secondly they can structure the rebates such that they only pay for performance.

The Independent wins because they are able to protect the margins made on the sale of the products from their sales force that often wants to discount to the maximum allowed by the invoice price. At the end of the Calendar quarter or year, the rebate cheque comes in and goes right to the bottom line.