Procurement Procedures to Gain Leverage
Achieving immediate buying power and deploying controlled procurement processes are some of the quickest wins for country clubs.
The most obvious solution in procurement has to do with economies of scale. Golf management companies simply represent a much larger book of business to vendors than a single stand-alone facility ever could. The fact is that a management company with dozens of clubs under their umbrella is going to achieve far superior pricing and terms on this basis alone.
The biggest gains in procurement are often seen in golf course agronomy. Shifting to a scaled approach to buying seed, chemicals, machinery and supplies typically brings immediate 6-figure savings – even for the most modest of clubs.
In cases where clubs are geographically centralized, there also may be opportunity for sharing or leasing certain equipment where standalone clubs could not.
Cut Costs with Buying Power
All too often, department heads with buying power do not properly seek out best possible alternatives for the club. Left unchecked, supplies, services, and vendor relationships can often be entered into for personal reasons rather than for what is best for the organization.
Sound golf procurement strategy means real buying power and vendors competing for your business.
The Path of Least Resistance:
Managers sometimes just don’t have the time to seek out best options and negotiate best possible prices. For one, they’re too busy. Secondly, there’s probably nothing in it for them and they don’t necessarily understand the ramifications to the club’s financial bottom line.
It’s very common for department managers to take the path of least resistance. They’ll work with vendors that they get along well with or who simply treat them the best.
Arguably, buying in bulk from a single vendor could bring possible incentive for price reductions. Normally however, this isn’t the case – particularly over time. The more ordering that is done with a single vendor, the more beholden the club becomes to that vendor. Additionally, it’s simply easier for the manager to place orders with a single company than through multiple vendors. Vendors aren’t chosen on the basis of merit, but as a matter of comfort or convenience.
Rarely is any real negotiation ever taking place.
Over time, as relationships become more and more comfortable, vendors often find themselves in position to push prices well above market norms. Remember, their motivation is to get the best possible fees for their products and services. Understanding that the buyer cannot or will not seek out alternatives means they can get away with above market price bumps.
These cases become more egregious when there is a cost to vacate the current situation. This could be a result of contractual obligations, striking a poor deal, or by virtue of the items or services being purchased. For example, after installing a new point of sale system, there would be considerable cost to change vendors. Poor negotiation or a lack of foresight on termination provisions or legal language could leave the club stuck with unfair carrying costs without any viable options to terminate.
Often unwittingly, department leaders will choose to do business with companies that “take care” of them. They might consider tickets to the baseball game, or free product perks of the job. There’s nothing wrong with some added benefits, so long as they’re acting in the best interests of the club first. We have however come across many cases where buyers were knowingly making disadvantageous deals with vendors for personal gain.
In the aggregate, like a frog in the frying pan, expenses slowly rise well beyond market levels in these kinds of relationships. The company is the one paying the price.