Procurement Cluster – Strategic Approach
Updated: Oct 25, 2021
Advantages Provided By Procurement Clustering
A geographic concentration of companies that are interconnected is known as a cluster. This could be service providers, specialty suppliers, organizations of related industries as well as associated institutions working in a specific field and more. These organizations may compete with one another but also benefit from cooperation. A standard cluster is one where businesses from different sectors engage in activities that focus on particular values and are intertwined.
Procurement Cluster Regions
There are certain geographic regions that act as a cluster for particular industries. In Switzerland, the cluster is watches, Rome and Paris are where fashion clusters are found. New York has finance and Michigan has vehicle clusters. Hollywood has movie making, and Las Vegas is a cluster for gambling. The Silicon Valley is a well-known cluster region for technology. These clusters are determined by geography. They attract financing, intellectual capital as well as entrepreneurial activity and workers who want to be part of a specific industry. These clusters have also been known to influence politics and obtain different types of support. Educational development, specialized research, as well as worker training, are promoted by these industry specific cluster regions.
Cluster Procurement Benefits
The focus of a procurement cluster is increasingly on developing a strategy that provides future solutions. This is done to meet demand. Purchasing volumes will be awarded to select suppliers who are carefully chosen. This is done to leverage the economies of scale. Any organization who wants this needs to start by creating a cluster management organization. These are suppliers and service providers working together because of their similarities. They have a chance to create volume based on collaborating with other organizations operating in the same industry, region or function.
Their job and the job of their team is to spend leverage where all procurement volumes and knowledge is shared. This puts everyone involved in the procurement cluster in a better position to create innovative solutions. It produces win-win scenarios involving strategically chosen suppliers.
Small And Medium-Sized Organizations
A procurement cluster is often most beneficial to small and medium-sized organizations. This will create conditions for the cluster members to better compete within their industry.
Strategic Approach And Volume Leverage
This enables cluster members to outline their activity with a common supplier. It gives them an opportunity to have pre-established goals and objectives. Their ability to have volume leverage will enable the cluster members to get the best price with large orders and experience cost savings.
Information And Trust
Members of a cluster are able to have more economical access to industry specific information. This makes it easier for them to go into other markets using common marketing and sales methods. Procurement clustering operations often share common experiences, customers, and regions.
Knowledge Exchange And Collaboration
A procurement cluster can make it possible for the businesses and workers involved to share information from causal meetings and conversations. This also makes it possible for organizations working in the same industry, located in the same region, to participate in joint activities.
Supply Base Development
Vendors want to be near their clients. Logistics clusters are a type of industry cluster. It will bring together different vendors such as a third-party logistics service providers. A procurement cluster can also attract warehousing companies, transportation carriers, distributors, forwarders and more. This is beneficial to organizations who have logistics as a big part of their costs for doing business.