NORTHEAST INSTITUTE FOR QUALITY COMMUNITY ACTION. E-MEMO #2: STRATEGIC ALLIANCES Realize Economies of Scale Given the economic pressures at most nonprofits, it is perfectly understandable that saving money on goods and services purchased for day-to-day operations are usually the subject of intense interest. Alliances created solely for the purpose of changing participants’ purchasing behavior are the loosest and least demanding kind of collaboration. These are shown on the bottom, or ‘Economic’ level in our C.O.R.E. Continuum of Collaboration. Since most economic gains involve more efficient dealings with outside suppliers, it is easier to build unity to deal with an external vendor. By contrast, all the other levels on the continuum (Corporate, Operations, and Responsibility) deal primarily with people and systems within the collaborating organizations, so a certain internal resistance is often an impediment to collaborative efforts. There are many ways to achieve greater efficiencies in nonprofit organizations’ buying power. Happily, few of them interfere with the accomplishment of the mission, which is what many people understandably worry about when attention turns to economics. In fact, anecdotal evidence suggests that in some cases it is entirely possible to save money and provide higher quality services at the same time. This Memo will describe a few distinct strategies for deriving economic gains from working with other nonprofits on purchasing. Supply purchasing is used to highlight collaboration strategies appropriate to this level of integration but other types of purchasing or leasing (e.g., vehicles, equipment, etc.) while more complicated may also share these approaches. Sharing Information One of the quickest, least expensive and intrusive ways of realizing economic savings is sharing information. Although information can be shared about any number of economic areas in a nonprofit for the purposes of this memo the area of supplies purchasing practices will be discussed. This example is being used largely because vendor-provided supply related services are easier to quantify and familiar to most people. There are many different levels of sharing economic information. The easiest is to compare recent information and experiences with different vendors of the same sort of product or service. A deeper approach would be to share copies of contracts and purchasing agreements along with accounting records. A yet more sophisticated technique would be to select one or more comparable items and track their price history side by side over a period of months.
NORTHEAST INSTITUTE FOR QUALITY COMMUNITY ACTION. E-MEMO #2: STRATEGIC ALLIANCES Realize Economies of Scale Given the economic pressures at most nonprofits, it is perfectly understandable that saving money on goods and services purchased for day-to-day operations are usually the subject of intense interest. Alliances created solely for the purpose of changing participants’ purchasing behavior are the loosest and least demanding kind of collaboration. These are shown on the bottom, or ‘Economic’ level in our C.O.R.E. Continuum of Collaboration. Since most economic gains involve more efficient dealings with outside suppliers, it is easier to build unity to deal with an external vendor. By contrast, all the other levels on the continuum (Corporate, Operations, and Responsibility) deal primarily with people and systems within the collaborating organizations, so a certain internal resistance is often an impediment to collaborative efforts. There are many ways to achieve greater efficiencies in nonprofit organizations’ buying power. Happily, few of them interfere with the accomplishment of the mission, which is what many people understandably worry about when attention turns to economics. In fact, anecdotal evidence suggests that in some cases it is entirely possible to save money and provide higher quality services at the same time. This Memo will describe a few distinct strategies for deriving economic gains from working with other nonprofits on purchasing. Supply purchasing is used to highlight collaboration strategies appropriate to this level of integration but other types of purchasing or leasing (e.g., vehicles, equipment, etc.) while more complicated may also share these approaches. Sharing Information One of the quickest, least expensive and intrusive ways of realizing economic savings is sharing information. Although information can be shared about any number of economic areas in a nonprofit for the purposes of this memo the area of supplies purchasing practices will be discussed. This example is being used largely because vendor-provided supply related services are easier to quantify and familiar to most people. There are many different levels of sharing economic information. The easiest is to compare recent information and experiences with different vendors of the same sort of product or service. A deeper approach would be to share copies of contracts and purchasing agreements along with accounting records. A yet more sophisticated technique would be to select one or more comparable items and track their price history side by side over a period of months.
StrategicAllianceMemo2.docx