Worldwide, Cooperative purchasing has its roots in the cooperative movements of early 19th century in England and USA (Wooten, 2003). The idea started when several smaller organizations interested in similar items realized that aggregating their requests together will lead to emergence of one large organization procuring the same item. This was so common in case where the supply manager would go through the competitive process to award the bid. This competition among the competing bidders would expose them to readily available products and other benefits. Not only that, Wooten also stated that these cooperatives were roughly designed to gather power of many small voices which were being exploited in the market to make one big voice which wouldn’t be exploited in the market. Their formation and daily operations were based on democracy, equality, equity& solidarity, responsibility and values of self-help (Wooten, 2003).Tella et al, (2004) stress that cooperatives have been widely used in the public sector and also in the retailing sector, but recently also the industrial sector has adopted it. All this can be seen in the business purchasing operations of the world’s biggest economies like USA, China, Britain, Germany, Japan, Russia et cetera. Cooperative purchasing and its programs are not so much self-help groups, they are rather methods supply managers’ use to more efficiently acquire materials Tella urges. Cooperative purchasing world widely has been employed in various areas like in but majorly in the schools, offices et cetera to procure school and office supplies, large ticket items; cars, services and insurance et cetera (Bishop, 2003).However, The Hendricks study reveals that most buying groups target MRO items (54% of respondents), followed by services (46%), direct materials used in production (42%), and capital goods(35%). This is logical as MRO, or commodity type purchasing is the least threatening and presents the slightest resistance from members and supply base to initially target. The area with the most potential return, but correspondingly the highest degree of risk is direct materials. Although significantly more difficult to attack, nearly half of these alliances target direct materials and, when successful, reap tremendous rewards. Most consortiums have focused on “low hanging fruit” for MRO and general services initially.
For instance, Purchasing in a 2001 interview with a consortium founder reported, “…we needed to find a common buy, so we started with office products,” says Mylett, now CEO of
Corporate United. “In the office products buy, we did strategic sourcing with the six companies. We pulled individuals from each of those companies to create a committee with about people and we created baselines, wrote a request for proposal (RFP) as a group, analyzed the responses as a group, scored them based on agreed upon criteria and awarded business as a group.” The result of the endeavor was that each of the 6 Fortune 1000 members companies to save between 12-25% on their office products spend. Point to note is the pioneers of Group Purchasing Organizations was the Health Sector worldwide. For example let’s take a case of USA, the first healthcare GPO was established in 1910 by the Hospital Bureau of New York. For many decades, healthcare GPOs grew slowly in number, to only 10 in 1962.Medicare and Medicaid stimulated growth in the number of GPOs to 40 in 1974. That number tripled between 1974 and 1977. The institution of the Medicare Prospective Payment System (PPS) in 1983 focused greater scrutiny on costs and fostered further rapid GPO expansion. In 1986, Congress granted GPOs in healthcare “Safe Harbor” from federal anti-kickback statutes after successful lobbying efforts. By 2007, there were hundreds of healthcare GPOs, “affiliates” and cooperatives in the United States that were availing themselves of substantial revenues obtained from vendors in the form of administrative fees, or “remuneration.” 96 percent of all acute-care hospitals and 98 percent of all community hospitals held at least one GPO membership. Importantly, 97 percent of all not-for-profit, non-governmental hospitals participated in some form of group purchasing.
With healthcare costs rising sharply in the early 1980s, the federal government revised Medicare from a system of fee-for-service (FFS) payments to PPS, under which hospitals receive a fixed amount for each patient with a given diagnosis. Other insurers also limited what hospitals could charge. The result was a financial squeeze on hospitals, compelling them to seek new ways to manage their costs. Also in 1992 where the Peoria Area Labour Management Council (PALM) established a health care purchasing cooperative to harness the purchasing power of the many smaller organizations within PALM, in order to negotiate for better price rates from the suppliers. This later became a discipline that up to now it is in existence with a lot of empirical evidence. Generally world widely, organizations that have implemented consortiums have been exposed to cost reduction, increase in product availability et cetera. Nevertheless, they are also facing challenges like changing organizational environments, lack of trust, fear of parasites and sharing sensitive information et cetera which are greatly impacting on their performance..
According to Jürgen Schwettmann, (2014), cooperative purchasing in Africa owes its roots to the way of life of Africans from the beginning up to date especially to the clans and communities. For example they always embraced togetherness in every activity that they did.This continued interaction created informal cooperation can be further seen among the way the African farmers helped each other in carrying out agricultural activities like bush clearing, harvesting et cetera which made early agriculture possible because of the mutual aid among the farmers. This continued informal cooperation led to the birth of informal cooperatives which were characterized by solidarity, cooperation, reciprocity and mutuality. These traits are more vibrant up to date in the rural areas and the urban informal associations ROSCAS also referred to as “Tontines” in French. These ROSCAS can been seen to day in all African countries like Uganda, Kenya, Tanzania, Nigeria, Ghana, Tunisia, Algeria and others which are performing wonders up to date. Formal cooperatives were later introduced in African countries in the 20th century by their colonialists respectively according to their patterns of rule, structure. Later on the colonialists brought in a new feel by making the their administration undertake systematic efforts to develop cooperatives into powerful businesses that through vertical structures, they controlled much of the agricultural production, marketing and processing in rural areas in particular regard to export crops which has been described as “United Cooperative Model). This experience enabled the Africans to learn how to relate with other people, not only that also it made them to value efforts of a group over an individual efforts. This experience laid down a firm foundation for the development of groups to buy and not to sale their products, for example these agricultural cooperatives enabled farmers to be exposed to relatively cheap farm equipment and tools due to the bulk purchases which earned them trade discounts. This lead was later adopted by the African governments mainly in the health sector, this vice started to be adopted in the official matters like mainly in the public sectors (Wanjiru, 2015; Gray, 2002; Tella et al, 2004). This was seen by the African governments sourcing third parties to be buying for the health centres supplies, this was because of the increase of the supply of counterfeit drugs which were endangering the citizens’ lives. For in Uganda there was formation of the Joint medical stores and National Medical Stores to be purchasing the medicine on behalf of both the private and public medical centres (Jacquiline Emodek, 2015). The strategy was also adopted by certain private entities most especially the business men who imported goods from outside, they came together to source from outside in the run to reduce on the costs incurred, attract suppliers due to bulk purchases, be exposed to quality goods et cetera( Schotanus& Telgan, 2007). The level of implementation of the strategy is relatively high in the public sector because of the uniformity in many variables like culture, values, reporting, mission, which is not the case in the private entities because of the challenges which face the implementation in private entities like; different cultures, values, limited resources, fear of parasites et cetera (Gray, 2002; Williamson, 1985)
In Uganda cooperative purchasing owes its excellence way back to the colonial period where the colonialists introduced formal agricultural cooperatives (Jürgen Schwettmann, 2014). According to Jacquiline Emodek, 2015’s New Vision article, the actual group purchasing activity was ushered in by 1979, after the Uganda-Tanzania liberation war that led to the overthrow of President Idi Amin’s regime, there were a number of donors supporting each health unit. However, they were doing this individually; some were supporting more than one, but without a distinct coordinated structure.
This realization led to the Roman Catholic Church and the Church of Uganda through their medical arms (the Uganda Catholic Medical Bureau and Uganda Protestant Bureau respectively), making the decision to set up the Joint Medical Stores (JMS).
“This was so that it could support the supply chain for the mission health units; to ensure that they get good quality products in time and also co-ordinate donations,” Dr Bilard Buguma JMS, the executive director, says.
Also previously each health centre in Uganda was purchasing its own drugs which proved too costly, the centres kept on running out of stock and they were also exposed to counterfeit drugs which were harmful to the lives of the citizens. Therefore in pursuit to mitigate those problems government decided to form National Medical Stores in 1993, to be responsible for sourcing the drugs for the health centres. From then JMS has become a third party which helps private medical centres to source drugs from outside the country. As for NMS it got the full authority to procure, store and distribute medical supplies and medicines to all public health facilities in the country, army, police and prisons in 2012. The use of the third parties to procure medical supplies and drugs was aimed at attaining cost reduction, increase the product availability, be exposed to quality goods and others (Schotanus&Telgan, 2007; Tella et al, 2004). The benefits accumulated and this also attracted the business men in Kikuubo who also adopted the vice in their importing of goods from outside. Putting aside the benefits accrued, the strategy is faced with facing challenges like differences in cultures, values, motives; fear of parasites and sharing of sensitive information, fear of loss of control et cetera ( Gray, 2002; Schotanus et al, 2005) which have influenced the performance of organizations.
In Kasana Health Centre IV, cooperative purchasing is a practice evidenced by the use of the third party, NMS. The HCIV greatly benefited through cost reduction, increased product availability, improved efficiencies, better compliance with the statutory laws et cetera (Schotanus& Telgan, 2007; Kivisto, 2003). However, putting the benefits aside, the HCIV is also faced with many challenges like trust and cooperation issues, delivery of wrong drugs, stock outs, bureaucracy, limited staff involvement, conflicting motives, different organizational cultures; values et cetera (Gray, 2002; Williamson, 1985). These have negatively influenced the performance of the HCIV.
