When you buy something, let's say a Coke (or Pepsi, as you wish) , that are two facts: what you are buying and when you are buying. There are many other several facts, but these two hold critical importance.
When you buy your Coke you are doing two important decisions: you decided to buy the Coke at that specific time. The good thing about supermarkets is that you can decide to buy your Coke at any time. But you can even decide for Pepsi, Dr. Pepper, or any other soft drink.
The SMEs (Small and Medium Companies) dilemma
Each company needs to buy stuff, either computers or insurance contracts. Imagine two companies: Travels Inc. and Pizza Inc.. Both need to acquire furniture for their new offices. Travel Inc is opening an office in two months time and Pizza Inc in a one month time. Also, they were looking for desks and chairs.
Now, what is the probability that they choose to buy on the same week and the exact same model of desks and chairs? ZERO. If they are thinking of that, I suggest them also to buy a lottery ticket.
Missed Opportunities
By choosing similar but not exactly the same brand and model, they are missing the opportunities of economies of scale. This is why SMEs are buying core business products at 25% more that large enterprises, and for non core business products they are buying up to 100% more than large enterprises.
Planning the Purchase
By joining forces will other fellows SMEs and planning in advance the purchase, each SME can collaborate with others SMEs to achieve scale.
You may think that at an hypermarket you have all choice in the world. Wrong! You have access to just 50,000 references of about 20,000,000 references out there. The management guys at the hypermarket already limited your choice. Maybe you get the regular Coke, the diet Coke, but you don't get Coke with a twist of lemon.
That relatively low number of references allow the hypermarket to gain scale in each product. If you think of discount food store that the number of references drops from 50,000 to only about 800. Now you don't find the dippers you want, but those at the shelves are 25% at a lower price than those at a hypermarket.
There are no free lunches
What a large enterprise, the choice of desk is limited in the entire enterprise. You can see a large enterprise at a sum of many departments, and each one could resemble a SME. The difference is that you won't find several brands and models of desk. Probably, you may find just two or three different models.
The large enterprise entered in a compromise, and each department or sub unit is much happier saving 45% of the list price for acquiring the desks than with the alternative model with a slightly different color.
The lunch at a SME is an expensive one
The SME are usually owned by a short group of people, I would say that the vast majority of them is owned by 3 or less people. The reason why the partners decided to create an SME is usually to have control of their lives, time and business.
The fact they are in control is the exact the same reason they lost control of the negotiations during a purchase. Many times the partners of Travels Inc. and unwilling to agree on brand and model of desks and chairs with the partners of Pizza Inc.
The price they over pay is basically the price of their liberty. In recession times is many times the price of their bankruptcy.
Call To Actions
Find SMEs that will expectedly buy the same products you need in the reasonable time frame.
This is much easy to say than to do. In tomorrows post I'll suggest a way out.
You may think that at an hypermarket you have all choice in the world. Wrong! You have access to just 50,000 references of about 20,000,000 references out there. The management guys at the hypermarket already limited your choice. Maybe you get the regular Coke, the diet Coke, but you don't get Coke with a twist of lemon.
That relatively low number of references allow the hypermarket to gain scale in each product. If you think of discount food store that the number of references drops from 50,000 to only about 800. Now you don't find the dippers you want, but those at the shelves are 25% at a lower price than those at a hypermarket.
There are no free lunches
What a large enterprise, the choice of desk is limited in the entire enterprise. You can see a large enterprise at a sum of many departments, and each one could resemble a SME. The difference is that you won't find several brands and models of desk. Probably, you may find just two or three different models.
The large enterprise entered in a compromise, and each department or sub unit is much happier saving 45% of the list price for acquiring the desks than with the alternative model with a slightly different color.
The lunch at a SME is an expensive one
The SME are usually owned by a short group of people, I would say that the vast majority of them is owned by 3 or less people. The reason why the partners decided to create an SME is usually to have control of their lives, time and business.
The fact they are in control is the exact the same reason they lost control of the negotiations during a purchase. Many times the partners of Travels Inc. and unwilling to agree on brand and model of desks and chairs with the partners of Pizza Inc.
The price they over pay is basically the price of their liberty. In recession times is many times the price of their bankruptcy.
Call To Actions
Find SMEs that will expectedly buy the same products you need in the reasonable time frame.
This is much easy to say than to do. In tomorrows post I'll suggest a way out.
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