Reap The Benefits Of Buying Group Regional Distribution Centers

Buying groups bring independent distributors together into large 
organizations to give them buying power and discounted pricing. In addition, these organizations offer distributors value-added services such as marketing materials, trade shows and technical expertise. Three distributors share their experiences and discuss the benefits of joining a buying group.

Buying Groups Bring Improved Logistics

John Treat does not consider the organization that he joined in 2003, and now leads as the chairman of the board, a buying group that just provides large discounts to its members, but rather a national distribution, networking, sales, marketing and logistics organization.

“We’re not clipping coupons here,” says Treat, owner of Treat Solutions, a distributor with three locations in Oklahoma.  

One of the major benefits of being part of this type of organization is that inventories can be smaller and, as a result, distributors can run leaner operations, says Treat. 

“If I were to buy 50 things from 50 manufacturers, I would have to cut 50 purchase orders,” Treat says. “Money is speed, money is time, money is resources. It costs less to write one check than 50 and one purchasing order, not 50.”

The organization’s three regional distribution centers allow members to consolidate their purchasing efforts. This is because members are dealing with a single center rather than numerous manufacturers.

“That is huge savings in money, time, energy and inventory,” Treat says. “Unlike the philosophy that I need to buy more and put it into my warehouse, less is better. I have less spillage on my inventory. I don’t have rusty cans. I have less bin locations, less duplication.”

Before joining the buying group, Treat had about six turns on his inventory. Now, he has 11 turns.

“That’s huge money,” he says.

Manufacturers are receptive to the distribution center model because it creates a shorter logistical chain for them, Treat says.

“They love to sell to us and drop their goods in the regional distribution centers because they make more money,” says Treat. “They don’t have to ship as much.” 

In addition to freeing up capital, a regional distribution center model like Treat’s can save time. For example, Treat can expect to get merchandise in about three days rather than a much longer lead time if he were dealing directly with manufacturers.

Treat’s buying group also offers members its own private label products along with web and marketing support.

Membership in Treat’s organization is based on stock ownership. This allows members to have a voice and control in how the organization operates. The organization has set stock ownership limits so no member can monopolize power, Treat says.

The buying group also has geographic exclusivity among its members. According to Treat, membership is based on geographic area, with no overlap, so members do not compete with each other.

“Each one of us have our exclusive areas. I got most of Oklahoma that I sell our brand products in and I don’t have to look over my shoulder with someone saying that they have the same thing for less dollars,” Treat says.