A large number of small- to medium-size companies buy their foreign-made materials from sources in the United States. These sources are typically the U.S. subsidiaries of major foreign companies, or sometimes distributors and representatives for those companies.

These third party companies shelter the buyer from some of the more difficult problems facing international buyers. They are in a local time zones, they speak English, they understand American business culture, and they take care of all the customs and logistics issues.

This gives the buying companies a choice of "global products", in addition to their domestic purchases, but it will not help them fully benefit from what global purchasing has to offer.

Another option is to join, or form, a consortium, called Global Consortium Buying.

Group and cooperative buying has been practiced by buyers in non-profit and not-for-profit organizations such as hospitals, nursing homes, museums and educational institutions. Buying together brings the advantages of higher volume prices when lower volumes are combined or leveraged.

Buyers in the manufacturing and service sectors are only just beginning to investigate the possibilities and advantages of the consortium effort.

In this arrangement, companies in different fields with similar materials and/or service requirements join forces. To enter into this kind of alliance, the allies must be familiar and comfortable with each other. Because of the necessary sharing of highly proprietary information, the consortium members must trust each other and protect their partners' competitive information, even trade secrets, as if they were their own.

Such alliances are likely to be formed among a small number of partners - although the companies and purchased volumes might be quite substantial.

The relationship between the partners must withstand legal and ethical challenges. Thus the partners may be likely to adopt a written agreement to include non-disclosure terms and other agreed upon principles, policies and procedures.

The team composition and the structure of any documentation will vary by commodity and by each partner. Each consortium effort may designate lead negotiators as well as the overall assignment of specific tasks.

The partners are not likely to be competitors, unless the firms are geographically restricted so as not to compete in the other's territory.

Most likely the consortium members are already linked in supplier-customer relationships who extend these relationships into joint purchases of common requirements. The partners might also be geographic neighbors, operating in different industries and having certain requirements in common.

The partners might also be former members of a corporate family who are now legally independent and can still benefit from this joint endeavor.

Small to mid-sized companies are good candidates for partners in a consortium.
If Consortium Buying is likely to be formed by small- to mid-size companies, some large corporations also benefit from this trend.
Example of large corporations in a Consortium Buying Group:

Initiating the consortium is not an easy process, especially the first ndertaking. In any event, strong arguments in favor of this new kind of strategic alliance are reduced cost, increased competitiveness, and cooperation with highly reputable, non-competing firms.

The partners joining forces in a consortium alliance face a number of risks that must be understood and faced openly. These risks include antitrust challenges, reluctant supplier cooperation, perceived control, exit barriers, integrity, extent of savings and supplier choices.

To minimize the risk of antitrust exposure, consortium efforts cannot be used to restrict price competition, boycott suppliers, markets, or boycott other buyers. Consortium experienced executives have found that the major concern of suppliers is the potential violation of the Robinson-Patman Act. This law requires that favorable prices received by a buying group must be available to comparable buyers unless the price differential is cost-justified or granted to meet a competing supplier's price.

Membership in a purchasing consortium must therefore be open to other buyers who meet the criteria and time constraints of the group. These criteria must be objective and relate to demonstrable commercial necessity. Supplier cooperation can be a challenge to the project. Potential suppliers to the alliance may fear expensive concessions and be reluctant to endanger their current relationships with individual partners. Some may even try to jeopardize the partnership by playing members against each other.

Prospective partners may also be concerned about the ethical standards of their allies. Any misconduct by any of the partners will reflect unfavorably of the other members of the consortium. Accordingly, the integrity and reputation of all partners have to be outstanding. The partners must be open in sharing information and protective in preventing information leaks.

Whatever the risks the consortium entails, they are shared by all members of the alliance.

However, the risks are outweighed, by far, by the many benefits that accrue to both the consortium partners and to their suppliers. The single most powerful driver of the consortium is cost reduction which occurs in several ways. Improved quality and joint learning of valuable professional techniques and strategies also occur.

Consortium Buying is the best alternative to "direct" global purchasing: