Unfair allocation of gains under equal price in cooperative purchasing

Cooperative purchasing is becoming more and more common practice. However, many cooperative initiatives end prematurely or do not flourish. Important reasons indi-cated for these problems are directly or indirectly related to the unfair allocation of gains. The purpose of this paper is to analyse causes of unfairness in current cooperative practices, and in particular unfairness resulting from using the Equal Price allocation concept. I suggest that the unfair effects of this commonly used concept are caused by neglecting a specific part of the added value of cooperative initiative members. Moreover, I prove that when using the Equal Price concept organisations will receive fewer gains if they increase their volume past 38% of the total volume of a cooperative initiative. In case of a constant total volume I prove that Equal Price reaches its maximum pay-off when the volume of an organisation equals 25%. I conclude by emphasizing the importance of cooperative members becoming aware of allocation concept problems. Further research will involve possible solutions to these problems

Horizontal cooperative purchasing

Purchasing in groups is a concept that is becoming increasingly popular in both the private and public sector. Often, the advantages such as lower purchase pricese, learning from each other, and reduced transaction costs outweigh set-up and management costs and drawbacks such as disclosure of sensitive information and the fear of free-riding group members. The concept is not always successful though. Still, it has received relatively little attention in management research.\ud \ud In this thesis, we study the establishment and management of purchasing groups. We define purchasing groups as organizations in which horizontal cooperative purchasing takes place. We define horizontal cooperative purchasing as the operational, tactical, and/or strategic cooperation between two or more organizations in one or more steps of the purchasing process by pooling and/or sharing their purchasing volumes, information, and/or resources

Cooperative purchasing within the United Nations

To support cooperative purchasing within the United Nations we carried out an empirical study in 2004, mainly to define cooperation forms, and to identify and rank motives and critical factors for cooperation. Important reasons to work together turn out to be lower prices and transaction costs, sharing information, and learning. Reasons not to work together are i.e. lack of opportunity or priority to purchase cooperatively. Most of the literature in the area of critical factors focuses on factors such as trust and support. Based on our study, we also emphasize the importance of choosing the right products and services. Furthermore, we observe what we call the hitchhikers’ dilemma. This dilemma deals with small agencies hitchhiking on contracts from large agencies. For large agen-cies there may be no incentive to allow hitchhiking. For small agencies hitchhiking can be very interesting though. Possible solutions to this problem are savings allocation mechanisms. The paper concludes with suggestions for further research

Implications of a classification of forms of cooperative purchasing

Our main objective is to classify different forms of cooperative purchasing, i.e. purchasing groups. Based on a literature review, empirical findings, and new institutional economics we employ a classification: the highway matrix. In this matrix we distinguish five forms of cooperative purchasing according to the ‘influence by all members on the group activities’ and the ‘number of different group activities’. The classification can serve as a guideline for (potential) purchasing groups when a suitable form needs to be chosen. Managerial implications of a classification include an emphasis on differences in organisational structure and critical factors. Research implications include an emphasis on the importance of using a classification, as different forms of cooperative purchasing imply different models and mechanisms

Supplier selection requires full transparency

In this paper, we highlight a number of problems arising with a commonly used supplier selection method: the weighted factor score method. We discuss the behavior of this method with respect to weighting, scaling issues, and relative scoring. Assuming that there is no convex dominance, we formally prove that with the same supplier selection method, we can make any supplier win by judiciously choosing the right parameters of the awarding mechanism. This means that any supplier can win if certain parameters are not published in a request for a proposal. This result applies to both absolute and relative scoring methods. Also, we show that the buyer should fully disclose all details of the awarding mechanism to suppliers in order to get better bids. The practical implications of our results are far reaching for (public) procurement: full transparency and disclosure of all details of weights and awarding schemes is not only required to avoid subjectivity in supplier selection, but it also leads to better bids from suppliers

Effects of full transparency in supplier selection on subjectivity and bid quality

In this paper, we highlight a number of problems arising with a commonly used supplier selection method: the weighted factor score method. We discuss the behaviour of this method with respect to weighting, scaling issues, and relative scoring. Assuming that there is no convex dominance, we formally prove that with the same supplier selection method, we can make any supplier win by judiciously choosing the right parameters of the awarding mechanism. This means that any supplier can win if certain parameters are not published in a request for a proposal. This result applies to both absolute and relative scoring methods. Also, we prove that the buyer should fully disclose all details of the awarding mechanism to suppliers in order to receive better bids. The practical\ud implications of our results are far reaching for procurement, both public and otherwise: full transparency and disclosure of all details regarding weights and awarding schemes is not only required to avoid subjectivity in supplier selection, but it also leads to better bids from suppliers

Samenwerking kent grenzen: de 25%- en 38%-regels

Welke inkoper kent ze niet? Handvatten als de 80-20-regel en de Kraljic-matrix. Aan deze set van handvatten kunnen twee nieuwe regels worden toegevoegd: de 25%- en 38%-regels, te gebruiken bij inkoopsamenwerkingsverbande