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esourcingwikilogoThis week's eSourcing Wiki-Wednesday topic is Common Fears of Consortia. An excerpt of the article is below, but you can also read the full article on the eSourcing Wiki. Have something to add? The eSourcing Wiki is an open content community and you are invited to register and contribute to this resource, which benefits our whole professional community.

If you are interested in more, read today's post on 'The Point': Goldilocks and your consortia

Common Fears

When attempting to select a consortium, chances are good that there will be some resistance. This is often do to innate fears held by the dissenters. They will not always be rational fears, but it is important to understand, rational or not, what the fears are so that arguments can be devised that will both combat the fears while educating the dissenters as to the benefits a consortium could bring.

Anti-Trust Regulations

Those opposed to pooling purchases will often say that purchasing consortiums are a concentration of market power that reduces competition, stifles innovation and creates barriers to market entry. Some will go even further and suggest that such consortiums violate anti-trust regulations.

While exclusive dealing, sole-source contracting, quantity or market share discounts and similar practices are occasionally anticompetitive, the conditions for competitive harm necessary under the law are rarely satisfied.

Consortium is too small

If the consortium is new, and membership is small, dissenters will explain that there are not enough members to bring enough additional buying power to the table to make enough of a difference to make it worthwhile.

Consortium is too large

If the consortium is well established, and has a lot of members, detractors may say that the consortium is too large, that the needs of the organization will not be met because they will be lost in the collective, or that the size of the consortium will make the purchasing process burdensome and inefficiently slow.

Consortium is too diverse

If the consortium is open-enrollment, it could bring together buyers with widely diverse needs and philosophies. Detractors will insist that this will only result in untenable complexity and disfunction.

Consortium benefits the competition

The largest and most obvious point of a consortium purchasing model is the collaboration and partnership involved, often with rival companies, the competition, or the so-called enemy. Dissenters will insist that it will help the competition while hurting the organization.

Loss of Competency

It is quite possible that some of the competencies that are possibly less obvious in normal procurement activities be lost when purchasing work is effectively outsourced. Dissenters will insist that critical competency and the benefits it offers will be the first to go.

eSourcingWiki is an open content community of strategic sourcing and procurement best practices. This wiki is intended to be a dynamic document that constantly adjusts and transforms to current trends and thought leadership in supply management. IASTA welcomes global contributors to assist in the ongoing documentation and knowledge building that is essential to creating useful information for supply management professionals.

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