Joint procurement of complex products: actual price savings, perceived nonmonetary advantages, disadvantages and impediments

Abstract

Purpose

Little is known about actual price savings generated by cooperative purchasing and nonmonetary advantages, disadvantages and impediments for the cooperative purchasing of complex or high-risk purchases. This paper aims to explore these topics by studying joint purchasing of pacemakers in The Netherlands.

Design/methodology/approach

To evaluate the magnitude of price savings, data on individual and collective prices for 18 hospitals was analyzed. In addition, 16 interviews were carried out with representatives of hospitals that participated and did not participate in the joint purchase.

Findings

Based on quantitative and qualitative data, the authors found large differences in price savings which can be attributed to scale, but mostly to knowledge of the group and renewing a contract in a technology-driven and developing market. Limited product choice – because of an organization joining a cooperative – constrained the attractiveness of cooperative purchasing, as end users may have specific product preferences. The consideration of preferences of end users is important toward successful joint purchasing of complex items.

Social implications

The authors argue that price savings because of scale are about 7% for smaller organizations and 4% for larger organizations. For smaller organizations with low specific knowledge and capacity for buying complex products, economies of process and knowledge are more important reasons for joining a purchasing group than scale. For large organizations with high specific knowledge and capacity, scale is the most important reason.

Originality/value

This study combined qualitative and quantitative perspectives, using actual spend data, to investigate cooperative purchasing of high-risk or complex purchases. On the one hand, more insight into the magnitude and reasons for price savings is provided than in earlier literature. On the other hand, more insight is given in qualitative reasons for joining a group and challenges for cooperative purchasing of complex items.