Aggregation: Is bigger always better? - Eupian

SomepracticalconsiderationsIn this final section we provide a checklist of questions to be considered in reaching decisions about aggregation.Not every question will apply to each procurement; the aim of the list is to allow you to satisfy yourself that yourprocurement strategy is likely to result in the best possible value for money in the short and longer terms – taking intoaccount the specific features of both your demand and the relevant supply market.DEMAND side issues to considerBaselineSUPPLY side issues to considerWhat has been happening?• What have we been buying? How many and at whatprice? (use industry-standard classifications)• Are there others buying similar things in otherorganisations?• How do the prices we pay compare with others’?• Is there ‘silo’ or ‘maverick’ buying within our ownorganisation?• Is there room for greater consistency in prices, orgreater standardisation of specifications? Are ourrequirements really that different from those of others?ScopeWhat is my requirement?• Are there several discrete elements to therequirement, for example geographically, or in termsof the overall product or service?• How widely could I draw my net if I wanted to?Do other departments have similar requirements?How similar are they? Overall value for money for all“buying consortium” members must be achieved –taking account of what is essential and what isoptional to each member and also of process costs.This analysis may point to either an aggregated ordisaggregated approach.• Are there other related requirements that could beprocured together (bundled) with this one within myown organisation? Are there elements of the bundledgoods and services that are critical to my business?Should I consider procuring these separately or couldthe necessary controls be put in place through supplychain management? (see OGC’s Contract Innovationguidance for more information).What are the key features of the market and howcompetitive is it?• Are we dealing with a local, regional, national orinternational market? If we were to aggregate ordisaggregate would this change the answer?• If the market is local or regional would there be anybenefits to be obtained from aggregatingrequirements across geographical regions, or wouldsourcing locally be a better option?• Are we, collectively, a significant purchaser in themarket? If so, would we achieve greater economies ofscale and/or leverage through presenting aconsolidated requirement to the market?• Is this a market where there are significant economiesof scale to be obtained by scaling-up production andlogistics, or would aggregation only deliver reducedtransaction costs?• What are the key factors that influence price in themarket?8