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In an era of escalating industry consolidation, it can be tough
for an independent regional distributor to compete. For that reason,
a number of distributors look to buying groups and cooperatives
to increase their purchasing power.
Buying groups and cooperatives have a long history in the welding
and gases distribution industry. They serve as a means of helping
small to large regional distributors remain on a level playing field
with national competitors who are more easily able to take advantage
of volume discounts from vendors. In a traditional buying group,
members cooperate to negotiate prices with vendors. A cooperative
also does that, but offers additional services as well. According
to statistics from the National Cooperative Business Association,
approximately 250 purchasing cooperatives serve more than 50,000
independent businesses across the nation, including the welding
and gases industry.
Below are a few such groups in which GAWDA members participate.
| AIRCO
Distributor Association (ADA) |
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Cooperative or Buying Group?
Buying Group
Members: 120
Requirements for Membership Include:
1. Have a fully executed distributor agreement
with BOC Gases.
2. Purchase at least 80 percent of atmospheric
gases requirements from BOC
Gases.
3. Commit to buying through ADA to ensure
maximum rebate benefit for
all members.
Meetings: Annual membership meeting
Leadership: Co-chairs Terry Hall, BOC Gases,
and Craig Wood, O.E. Meyer Co.
Web site: www.bocgases.com/adanow
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Independent
Welding Distributors
Cooperative (IWDC) |
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Cooperative or Buying Group?
Cooperative
Members: 150
Requirements for Membership Include:
1. Be independently owned.
2. Be fully dedicated to the welding and gases
industry.
3. Supply both hardgoods and gases.
Meetings: Annual owners' meeting (fall)
and buying convention (spring)
Leadership: Chairman of the Board Joe Churilla,
Cameron Welding Supply
Web site: www.weldmark.com
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| Independent
Distributor Cooperative (IDC) |
Cooperative or Buying Group?
Cooperative
Members: 126
Requirements for Membership Include:
1. Commit to purchasing from 70 percent of IDC's
Primary Vendors.
2. Commit to purchasing 70 percent of total purchases
from those selected vendors.
Meetings: Annual shareholders' meeting
Leadership: President Bob Paul, Hobart Industrial
Gases & Supplies
Web site: www.welders.to |
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Is It Right for You?
The industry's various cooperatives and buying groups all offer
differing services and have different bylaws and requirements, and
what may be a good fit for one distributor is not necessarily the
best fit for another. If you are considering membership in a cooperative
or buying group, do your research to determine which type of organization
would be the best fit for your company and whether the groups in
question are seeking new members. Bear in mind that each type of
group comes with both advantages and responsibilities for members.
Participation in a buying group or cooperative can play an important
role in the competitiveness of your business, but only if the fit
is right on both sides.
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| Beyond Buying |
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A hallmark of cooperatives and buying groups is the ability
of their members to take advantage of vendor pricing to which,
as smaller independents, they ordinarily would not have access.
However, a cooperative differs in a number of ways from a
traditional buying group.
IWDC, for example, offers a private-label brand exclusively
through its members, including a line of specialty gases,
and maintains 16,000 sq. ft. of warehouse space in Indianapolis.
But one of the group's most important differences is that
members retain the profits from the cooperative. At the end
of the year, the cooperative's board of directors determines
what percentage of the profits will remain within the cooperative
to fund its operations, and the rest is disbursed to the members
in the form of patronage dividend checks.
IWDC also recognizes that one of the “hot buttons”
in the industry is national accounts, in which larger companies
are looking to consolidate their purchasing by finding a single
vendor to serve all of their locations. As such, one of the
group's current initiatives is to find new members to fill
in specific geographic voids, thus giving its distributors
an opportunity to compete on yet another playing field more
traditionally reserved for large national corporations.
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