Can your company build its own purchasing power?

Purchasing power comes from being a customer worth keeping: predictable volume, clean orders, and payments on time. This article looks at how organizations build leverage with suppliers, and what to consolidate first if your spend is scattered across too many vendors.

Majdi Sleimen

Co-Founder & COO, Tradogram

Strategic Sourcing

5 minutes

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Contents

If power is considered to be the ability to produce an intended effect, then the concept may be limited to Marvel Superheroes. Thankfully, this blog will broaden the definition of power to include your procurement department, but only after you follow these 5 simple steps for building purchasing power, from the ground up.

The economies of scale that can be generated from amalgamating requisitions make purchasing power an objective for companies of all sizes across a multitude of industries. Procurement has become one of the most significant categories for savings, as it can represent up to 50% of total corporate expenses. That being said, any attempts to use profits to construct a new Google-like office "structure" for employees are taken at your own risk, even if you do obtain the materials with cutting-edge, affordable, cloud-based software.

STEP 1: LAY THE FOUNDATION

Purchasing power can be surprisingly easy to attain with a strong foundation of supplier relationships. A functional communication system for vendors is a necessity - you've secured the very best, now you need to keep them and focus on negotiating costs for products and services in a manner that creates win-win scenarios for both yourself and your vendors.

STEP 2: INSTALL THE FLOOR

You've laid a respectable foundation of suppliers, so what's next? The floor, otherwise known as your internal team of procurement professionals. These are the people who will be doing the "ground level" buying for the organization, so they should function like a harmonious team and understand all processes. Is an approval required for an order? Who has permission to initiate a specific request? Requisitions are being sent collectively as a method for maintaining....WHAT budget?! The answers to these questions and more should be understood by anyone involved with procurement.

STEP 3: FRAME THE WALLS

Once the foundation and floor are in place, it's time to start making some noticeable progress with your purchasing power - the walls. The combined effect of solid suppliers and a strong internal team creates the perfect platform for collaboration, the key to growth, both vertical and operational. Collaboration is critical for purchasing success, as it allows everyone involved in the process to clarify and pinpoint item specifications. Even small adjustments made to an item's quality, quantity, and/or delivery time/place can result in enormous savings. All that's required is collaborative discussions and walls without upper limits.

STEP 4: SET THE ROOF

We just said that walls without upper limits are great - until it starts to rain. Perhaps a roof is a necessary element of building purchasing power after all! Setting the roof is a process that entails combining items from several requisitions and ordering together to lock-in an economy of scale. It's also smart to connect all contracts and create purchasing categories to ensure your requisitions are as accurate as possible - leave no room for duplicate or incorrect orders. When generating requisitions it also helps to use product catalogues, supplier websites, and any other tools that will fine-tune the process.

STEP 5: INSTALL UTILITIES

Congratulations, you've successfully constructed purchasing power! But don't forget the most important part - installing utilities. Also known as implementing facilitative, easy-to-use software, purchasing power can be established without such a tool, but the final results will be crippled - no utilities, and your building lacks comfort and functionality. What's the point of going to all this effort if no one wants to visit you? The right technology will promote planning, communication, and control throughout every phase of each transaction, meaning suppliers and team members won't be able to stay away.Keep these steps in mind when determining how to simplify and streamline your purchasing. Reducing ordering costs by implementing collective requisitions is the optimal way to ensure your organization is a force that rivals The Incredible Hulk - strong, durable, and able to leave a legacy. Also capable of massive destruction, but that's another blog.

Frequently Asked Questions

Can Tradogram give each department its own budget and approval workflow?

Tradogram lets you configure approval workflows and routing rules by department, location, project, or supplier, and set up budgets accordingly, so each department can have its own thresholds and approvers without IT having to build a custom setup for each one. Reed Global uses differing approval settings by branch as part of its Tradogram setup, reflecting how its departments actually operate. This kind of department-level configuration matters for organizations where a single company-wide approval rule doesn't reflect how spending authority actually works across teams.

What is purchasing power in procurement?

Purchasing power in procurement is the leverage an organization has to influence price, terms and service level when buying from suppliers. It comes from a combination of spend volume with a given supplier, predictability of that volume, payment reliability and how easily the supplier could be replaced. Total company revenue matters less than concentrated, forecastable spend in a category, which is why a mid-sized organization that consolidates its buying can sometimes negotiate better terms than a larger one whose spend is scattered across dozens of accounts. Purchasing power is built deliberately rather than granted by size.

How can a smaller company increase its purchasing power with suppliers?

Consolidate spend into fewer suppliers per category, commit to volume where the demand is predictable, and pay on agreed terms consistently. Suppliers price against risk and administrative cost as much as volume, so a customer who orders reliably and pays without chasing is worth more than the order value alone suggests. Bringing forecast data to a negotiation is often more persuasive than asking for a discount, because it lets the supplier plan production or stock. Before negotiating, establish what you actually buy in each category across the whole organization, since fragmented purchasing usually hides more consolidation opportunity than expected.

How does consolidating suppliers affect purchasing power?

Consolidating suppliers concentrates spend, which strengthens your position in negotiation and reduces the administrative cost of managing many accounts, onboarding records and invoice streams. The trade-off is concentration risk: fewer suppliers means greater exposure if one fails, raises prices sharply or cannot meet demand during a disruption. A workable approach is consolidating within categories while keeping a qualified alternative identified for anything critical, so leverage improves without removing the ability to switch. Consolidation also only produces leverage if the spend is visible in the first place, which is why it usually follows an exercise in mapping what the organization buys and from whom.

Written by:

Majdi Sleimen

Co-Founder & COO, Tradogram

Majdi Sleimen is the Co-Founder of Tradogram and a procurement expert with deep experience in source-to-pay processes and procurement optimization. He focuses on helping organizations streamline purchasing workflows, improve control over spend, and adopt more efficient procurement systems through technology-driven solutions.

Can your company build its own purchasing power?

STEP 1: LAY THE FOUNDATION

STEP 2: INSTALL THE FLOOR

STEP 3: FRAME THE WALLS

STEP 4: SET THE ROOF

STEP 5: INSTALL UTILITIES

Frequently Asked Questions

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