the municipal secretary desktop reference manual - Southwestern ...

Although commonality and volume are important factors in a joint purchasing venture, there
are problems which must be recognized and dealt with. One such issue is geography or area. If a
plan encompasses too many units in too large an area, the volume benefit gain will be offset by
increased costs because of geography. The critical key is to strike an appropriate balance between
volume and geography. Over time, the best method for resolving this problem is to make
adjustments based upon a review of the group=s experience. Another problem involving volume is
one of scale and its impact upon economic gain. At some point, volume can be of such magnitude
that diseconomies of scale may result rather than expected economies of scale. Again, experience
and periodic analysis can identify problems of scale for a given commodity.*
PERIODIC EVALUATION. A municipal purchasing agent, either individually or in cooperation
with other officers in the joint bid venture should periodically analyze the performance of the
purchasing operation. The purpose of such an analysis would be to ensure that current operating
policies and procedures have no adverse affects on potential economic gains to be derived from such
a cooperative scheme. The evaluation should be comprehensive and include an analysis of such
elements as: specification content, purchasing cycles, vendor relationships, commodity volume and
minimum order requirements.
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* The geography and scale issues may be resolved by the creation of areas within the
purchasing organization. Bids then would be taken based upon the area arrangement.
IX-34
Revised May 2006