Strength In Numbers

Members of buying groups and cooperatives understand the buying power inherent in cooperation.

In an era of escalating industry consolidation, it can be tough for an independent regional compressed gases and welding equipment distributor to compete. For that reason, a number of distributors look to buying groups and cooperatives to increase their purchasing power.

Buying groups and cooperatives have a long history in the welding and gases distribution industry. They serve as a means of helping small to large regional distributors remain on a level playing field with national competitors who are more easily able to take advantage of volume discounts from vendors. In a traditional buying group, members cooperate to negotiate prices with vendors. A cooperative also does that, but offers additional services as well. According to statistics from the National Cooperative Business Association, approximately 250 purchasing cooperatives serve more than 50,000 independent businesses across the nation, including the welding and gases industry.

Below are a few such groups in which GAWDA members participate.

AIRCO Distributor Association (ADA)

Cooperative or Buying Group? Buying Group
Members: 120
Requirements for Membership Include:
1. Have a fully executed distributor agreement with BOC Gases.
2. Purchase at least 80 percent of atmospheric gases requirements from BOC Gases.
3. Commit to buying through ADA to ensure maximum rebate benefit for all members.
Meetings: Annual membership meeting
Leadership: Co-chairs Terry Hall, BOC Gases, and Craig Wood, O.E. Meyer Co.
Web site: www.bocgases.com/adanow

Independent Welding Distributors
Cooperative (IWDC)

Cooperative or Buying Group? Cooperative
Members: 150
Requirements for Membership Include:
1. Be independently owned.
2. Be fully dedicated to the welding and gases industry.
3. Supply both hardgoods and gases.
Meetings: Annual owners’ meeting (fall) and buying convention (spring)
Leadership: Chairman of the Board Joe Churilla, Cameron Welding Supply
Web site: www.weldmark.com

Independent Distributor Cooperative (IDC)

Cooperative or Buying Group? Cooperative
Members: 126
Requirements for Membership Include:
1. Commit to purchasing from 70 percent of IDC’s Primary Vendors.
2. Commit to purchasing 70 percent of total purchases from those selected vendors.
Meetings: Annual shareholders’ meeting
Leadership: President Bob Paul, Hobart Industrial Gases & Supplies
Web site: www.welders.to

Is It Right for You?
The industry’s various cooperatives and buying groups all offer differing services and have different bylaws and requirements, and what may be a good fit for one distributor is not necessarily the best fit for another. If you are considering membership in a cooperative or buying group, do your research to determine which type of organization would be the best fit for your company and whether the groups in question are seeking new members. Bear in mind that each type of group comes with both advantages and responsibilities for members. Participation in a buying group or cooperative can play an important role in the competitiveness of your business, but only if the fit is right on both sides.

Beyond Buying

A hallmark of cooperatives and buying groups is the ability of their members to take advantage of vendor pricing to which, as smaller independents, they ordinarily would not have access. However, a cooperative differs in a number of ways from a traditional buying group.

IWDC, for example, offers a private-label brand exclusively through its members, including a line of specialty gases, and maintains 16,000 sq. ft. of warehouse space in Indianapolis. But one of the group’s most important differences is that members retain the profits from the cooperative. At the end of the year, the cooperative’s board of directors determines what percentage of the profits will remain within the cooperative to fund its operations, and the rest is disbursed to the members in the form of patronage dividend checks.

IWDC also recognizes that one of the “hot buttons” in the industry is national accounts, in which larger companies are looking to consolidate their purchasing by finding a single vendor to serve all of their locations. As such, one of the group’s current initiatives is to find new members to fill in specific geographic voids, thus giving its gases and welding distributors an opportunity to compete on yet another playing field more traditionally reserved for large national corporations.