The analysis of purchasing consortium for small and medium enterprises

Abstract

Lack of the buying power of small and medium enterprises (SMEs) in purchasing their raw material could hinder their competitiveness. The low buying power generally caused by the fact that SMEs purchase their raw material in small lot. Purchasing consortium offers SMEs to increase their buying power and obtain better pricing through the collective buying mechanism amongst SMEs. This paper proposes purchasing consortium mechanism using joint replenishment and vendor managed inventory. The analysis shows that SMEs gain potential cost savings in sourcing their raw material through the proposed mechanism.