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.

1. Startup of a Purchasing Co-op
Part 4

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

4. • Major Steps
• Technology Strategy
• Expertise & Resources

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