In a soft economy, organizations are challenged with finding savings, while conducting business more efficiently. In other words…you’re asked to do more with less. For many, applying basic principles of Spend Management is enough to get through turbulent economic times. But more and more companies are looking to squeeze out that additional 2-5% savings and one way they’re achieving that goal is by combining purchasing forces.

Consortium Bids/Purchases enable companies to leverage their collective size and drive greater savings on the purchase of goods and services. It’s similar to the combined purchasing power your company (hopefully) achieved by centralizing procurement of laptops for example. Only in the case of a consortium, the relative size of the purchase AND savings is increased, thus making it a very attractive process for buyers and their suppliers.

Another potential benefit is the synergies that can be created by the consortium members working together. Not only can you share the workload and learn from each other’s strategies and processes, you may also uncover new suppliers. The category expertise partners bring to table may help to fill some gaps or supplement your company’s in-house knowledge.

But before you rush out to create your own consortium, there are quite a few things to consider and necessary steps to take. In fact, the best analogy of the situation you’re getting yourself into is…marriage. You’re entering into a very serious relationship that requires a new paradigm of merging goals, time frames, finances, workload and expectations. So partner selection is very important.

What other best practices will drive you towards consortium bliss?

• Secure Executive Sponsorship - Identify an executive sponsor to develop and communicate the program charter and serve as an escalation point.
• Select the Right Categories - Look for categories where operating as a consortium can drive savings, due to economies of scale or hot opportunities due to market conditions.
• Nominate a Leader - Identify a project lead to drive decisions and collaboration amongst participants throughout a specific project.
• Formal Documentation of Project Goals - All parties need to be on the same page regarding expectations, metrics and objectives.
• Adhere to a Code of Conduct - Agree on what information will be shared among the group. Confidential and proprietary data should be scrubbed, normalized and managed by a 3rd party. A 3rd party can also help you avoid any anti-trust or potential legal exposures.
• Commit - Actively participate in all scheduled project calls, meet time lines for deliverables and data. Communication is key, so you must be attentive and accessible.
• Maintain Integrity - Uphold commitments to the council as well as to invited participants. Be open while also maintaining confidence in others’ info.
• Establish Exit Gates - Removing estimated volume by any one member could have a negative impact on the price achieved. Team members should adhere to established exit gates.

Kristin Aguiar is a Manager in Ariba’s Spend Management Services group.