Is a problem shared a cost halved?

Is collective purchasing the missing link to reducing overheads and how can advances in technology help schools regain control of costs?

By Jerry Brand, education expert and founder of The Facilities Collective

The education world is unique. From infant schools through to universities, whatever age group you are educating, the ongoing problems faced by most educational establishments today are the same. Whether it’s related to campus culture, decentralisation, community and communication, minimising waste or possibly the biggest headache of all, managing cost control, everyone is in the same proverbial ‘boat’. The cost of commercial goods and services also continues to rise as every penny counts in the struggle to control finances and avoid overspend.

Legacy IT systems and processes have not helped schools to keep one step ahead of the supply chain either. This is partly due to outdated technology and resource-hungry systems. Also the ‘stuck in a rut’ syndrome or fear of new technology means that the same mistakes are being made day in day out, pushing schools further away from their objective to regain control of costs.

Schools are sitting on the same side of the fence

Can things change? I believe so. But people don’t like change do they? Change is a bit scary. But if schools are serious about managing spending effectively a cultural shift is needed towards a more collective way of dealing with a common problem that all schools face; controlling the community spend whilst managing the price of all purchases that a school makes.

Whether you are a state school, Academy, FE/HE or in the independent sector, all education institutions are in the same boat when it comes to cost control, (whether it is government or private money), so why do they work in isolation of each other? Unlike commercial businesses, who are fiercely competitive and wary of giving the opposition any kind of helping hand or advantage over themselves, the education sector are actually sitting on the same side of the fence.

That is quite a unique thing and certainly something to capitalise on.But what does this mean? It simply means that the education industry has the capability to collaborate when it comes to dealing with external suppliers by creating one ‘powerful’ united front that will help to drive down costs of goods and force suppliers to be more competitive on price. Heard something similar before? You probably have. In fact there have been (and still are) a few collaborative or ‘join-forces’ type of schemes across various parts of the sector, but most have withered on the vine primarily due to a lack of technology to help corral the suppliers and institutions’ budget holders – the very people who purchase the goods and services that the schools are trying to centralise.

Common complaints are ‘Mr Smith wanted to use a local supplier’, ‘they have already ordered the goods’ or ‘no time to shop around for the best deals’. But when you multiply those experiences a dozen times (and more) across the campus or school, this results in a lot of wasted spend.

So what is the answer to sustainably low pricing? I believe the answer lies in collective purchasing and cost control whilst embracing the individual schools’ budget holders. So you can use a local supplier and continue to help the local business community, or choose a national supply price. But in so doing you also meet the challenges of a decentralised community, and control spending authorisation online. It’s actually quite simple when you analyse it…

Manage purchasing through good communication

To sustainably reduce the cost of products and services, there are two key areas to focus on;

  • Reduce the supply chain by going straight to the wholesaler, grower, manufacturer or source of the product and/or service that you want to buy. That will immediately save you anything between 15% and 20% without doing anything special.
  • Tell everyone online what you are paying for the product or service up and down the country (cover local price ranges and national contract prices). So that each school can decide on whether they would benefit from being part of the collective purchasing group. If their local price is high, it gives them a target to negotiate with, and if the goods and services are not available locally, then you can also benefit from the national pricing. For suppliers, prices are easy to keep high when the buyer doesn’t really know what they should be paying.
  • Agree group and individual budgets across the whole school community for known expenditure and new projects as they come up during the year. Include capital projects in the system to control pricing. You need to know what is being spent across your organisation, so an online budget that creates the authorisation for users to happily buy from a nominated supply base within their approved budget allowance makes for a happy campus. If anyone goes outside the allowance you need to know why so that you can redeploy other group users’ allowances, or increase the budget knowingly, not grudgingly.

Use modern technology and professional services

  • Structure your supply chain into local and national nominated product lists and service specifications, go online with them providing a live priced service where the suppliers are responsible for updating their pricing. This immediately controls ‘price creep’, allows collective purchasing opportunities and reduces each schools’ administration time in goods receipt, reconciliation and supplier payments, and updating of stock values as the whole order, receive, stock and pay process becomes both paperless and automatic. With direct integration into your finance systems.
  • Tell your ‘budget holders’ what is happening so they can help their budgets by buying through the system suppliers, and in so doing help the collective drive further economies of price whilst retaining and in some cases improving the quality of service provided.

Technology is the driving force behind cost control

Of course, all of the above is only possible with the right technology in place. Technology is always going to be the driving force behind concepts like this because it has the power to physically make it happen.

Technology must help schools to control spend in a dynamic way that is both automated and logical. But as with all new initiatives in the education sector, this new paradigm in collective purchasing and overheads control will take time to build. But with a gradual and well-informed change in mind set, educational establishments and their communities could really start to work together in the battle to control costs and simultaneously benefit from the experience.

The power of joining every school’s (and perhaps FE/HE) collective purchasing (which is significant) online will mean that all operations, regardless of size, geography, denomination or style, can benefit from purchasing together. But at present, the battle to control costs and avoid overspend remains, how long that continues is anyone’s guess – but I see a big light at the end of the tunnel.